02/16/2012 05:09 pm ET

Recovery Shows Momentum As Stocks Climb Higher

If yesterday's economic numbers were tasty but small potatoes, today's are a little more like a balanced meal. This morning's batch of economic data, including a big drop in new claims for unemployment benefits and a jump in new home construction starts, adds to the sense of an economy slowly gaining strength -- although from a very weak base.

Those numbers helped drive the stock market to an immediate rebound from its selloff yesterday, which happened to be the worst day of the (short) year for the Dow Jones Industrial Average.

Today the Dow gained 123.13 points, or about one percent, to 12,904.08, its highest close since May 2008. The S&P 500 stock index rose more than one percent to 1358.04, a nine-month high. And the Nasdaq Composite index jumped 1.5 percent to 2959.85, its highest mark since December 2000.

The Philadelphia Federal Reserve said its business-sentiment index for February rose to its highest level since October. New home construction starts rose 1.5 percent to an annualized pace of 699,000 units, higher than economists expected. That's still well below the pace of construction at the height of the housing bubble, when more than 2 million new homes were built in a year, but we really don't need too many more new homes, anyway.

The most encouraging piece of news was the big drop in weekly jobless claims to 348,000 from 361,000 the week before. This was the lowest level for claims since March 2008, back when the Great Recession was still just a wet-behind-the ears baby recession. The four-week moving average of claims, which irons out weekly fluctuations, fell to 365,250, the lowest since April 2008.

To steal a note from Jimmy McMillan, jobless claims are still too damn high. They were bumping along around 300,000 in the months before the recession began in December 2007. Job growth is still not fast enough to make a big difference to the 13 million or so people in this country who are unemployed.

But this is real progress. Several economists said seasonal adjustment factors were all working against us getting a good number this week, and we got a good number anyway.

"We have passed the inflection point for the economy," said Sung Won Sohn, economics professor at California State University. "Clearly the economy is gaining momentum -- albeit from a very low level."

Sohn, who was ranked the third-best economic forecaster of 2011 in a recent tally by The Wall Street Journal, does not project gangbuster growth this year. He sees GDP growth accelerating to somewhere between 2.2 percent and 2.5 percent from less than 2 percent last year. He sees 200,000 jobs being created per month, on average, this year. That is a little better than 2011, when job growth averaged about 152,000 a month.

There are still massive risks to the economy, including the ticking time bomb of the European sovereign debt crisis and the recent surge in crude-oil and gasoline prices as tensions rise between Iran and the U.S. and Europe. Economists at Capital Economics wrote in an email that they still see a Greek default and eurozone breakup delivering a massive shock to the global economy, possibly soon.

But if the economy can just get some space to run without such distractions, the gears seem to be turning for a self-sustaining recovery.