Friday's report on the nation's unemployment situation had a little for the bulls and a little for the bears, when it comes to this nation's economic outlook for 2011. While the unemployment rate plunged in December to 9.4 percent from 9.8 percent, only half of the improvement came from Americans finding new jobs. The other half of the improvement came from discouraged workers exiting the labor force, which has the perverse impact of reducing the unemployment rate.
(It's a quirk of the strange calculus that goes into divining the nation's unemployment statistics.)
Only 103,000 new jobs were added to payrolls last month, well below market expectations and below the 150-200,000 jobs needed to keep up with population growth and growth in the labor force.
Indeed, Federal Reserve Chairman, Ben Bernanke, in testimony before a Senate committee, acknowledged that it could be four to five years before the labor markets return to "normal."
"Normal," as measured in historic terms, implies a 5-6 percent unemployment rate. There are some who suggest that our labor force never will return to "normal." But that view is unnecessarily pessimistic and belies the improvements being seen in the economy, each and every day.
By the way, a quick return to "normal" would imply that the economy would add about 600,000 jobs a month for over a year, which it rarely, if ever, has done. Absent such an immediate and stunning improvement in job creation, there is virtually no way the unemployment rate could get back to "normal" in less than a few years, under even the most optimistic scenario.
That does not mean we can't, or won't, see meaningful improvement in the labor market in the months, and years, to come, that will be felt by all.
Many on Wall Street and many, many more on Main Street, were understandably discouraged by the December report and the Fed chief's comments, as one might expect, given the grudging improvement in the jobs picture, even as enormous piles of cash build up on bank balance sheets and in corporate coffers.
But this worry about the economy is beyond misplaced, in my view. After a serious recession like the one we have just experienced, borne of an economy gone wild, it is a miracle that we have recovered as much lost ground as we have, compared to the alternative scenario many of us were contemplating only two short years ago.
Yet, there remain countless doomsayers who suggest that another, even more serious crisis, is just around the corner. Citing the possibility of a renewed credit collapse in Europe, a series of municipal bankruptcies here in the U.S., or another leg down in the housing market, they say we are just days, weeks, or months away from that dreaded "double-dip," or another downturn that will make the first phase of the "Great Recession" feel like a walk in the park.
My good friends, economist, Nouriel Roubini; author and investor, Nassim Taleb; hedge fund manager, Doug Kass; and banking analyst, Meredith Whitney, all repeat a mantra that remains in vogue among the gloom and doom jet-setters.
They claim that we are being falsely encouraged by recent economic statistics that create an illusion of recovery that is either being borrowed from future prosperity, or is the very temporary result of "recession fatigue," a condition that I never before have encountered.
In short, and for a variety of under-discussed reasons, they are flat-out wrong.
Few of the naysayers have bothered to incorporate into their overly pessimistic assumptions some truly miraculous developments that have taken place since Ben Bernanke's "great intervention," which prevented us from experiencing a catastrophic 1930s-style depression, or a protracted, Japanese-style stagnation.
Unlike those prior periods, the U.S. economy already has recovered ALL of the lost output since the start of the Great Recession.
The statistics mentioned speak for themselves. In addition, market-based indicators, from stock prices to interest rates and commodity prices are, in tandem, forecasting improving future growth, not a return to recession. These indicators, when flashing the same signals simultaneously, rarely have delivered an errant forecast.
While many remain deeply concerned about the fragility of what might be the start of a self-sustaining economic recovery, there is real reason for optimism that, indeed, a true and lasting recovery is underway.
As I return to blogging for The Huffington Post, I despair over a political environment which has led us down a path that now goes beyond partisan politics, as of this past weekend, to one of a clear and present danger.
I also worry that far too many voices continue to prey on the financial fears of a society that has seen more than its share of problems and pain.
And, while I often have been described as a Cassandra, and rarely a Pollyanna, for the first time in many years, I see reason to rejoice in an economic recovery that, while uneven, appears to be gaining strength and durability every day.
If only our political situation would improve as much as our economic condition, I would hold even greater hope that happy days are, indeed, here again.
Ron Insana is a CNBC contributor, host of radio's The Insana Quotient and a partner at Kubera Advisors.
The doom & gloom crowd are looking at only current balance sheets. From that perspective things look dire. But that ignores the largest pool of resources - private capital. Last summer Scorpio Partnerships estimated that there was $10 trillion in uninvested wealth in the hands of high-net-wealth-families. $2 trillion of that has moved onto the market. Indeed, BofA, JPM, WF, & GS all paid their TARP loans off in one year by selling stock to these H-N-W-Families. Banks could actually write-down another $3 trillion in mortgage over-valuation and pay for it with such stock sales.
The fact is, there is far more private capital available for correcting balance sheets and stimulus than the government could provide. The trick is attracting that money back out of gold and mason jars and putting it to work. Banks and CEOs have simply terrified investors with their irresponsible management of finance and industry. But, these investors are desperate for something to invest in. The prerequisite to any bubble is too much capital chasing too few opportunities. That, and that alone, explains the recent rise in oil and commodity prices.
CNBC, Fox Business, and Bloomberg are very hard to watch at times due to their lack of reporting on the good numbers that are buried in the economic data reports.
It is hard to sometimes see the good news when housing prices are still falling, foreclosures are at record levels, and the jobless rates are still way too high, because we Americans got so used to instant gratification of our unbridled spending we all did in the last decade, so this slow slow slow recovery is like a hangover headache that just won't end.
Please keep reporting the good news Ron, because we are so in need of your optimism and positive spirit!
http://www.kuberapartners.com/
Kubera Advisors is an independent advisory firm, not a private equity firm.
Ron
jus sayin.
The 1% of the US that makes most of the money, produces nothing. The people that actually go to work everyday and do something productive, make comparatively very little for their efforts.
That is an unsustainable business model. It has not been changed since 2007, in fact it has gotten worse since then.
What corrective actions have been taken?
A brand new theory on economics has apparently be adopted. If you ignore a problem long enough it will go away on it's own.
All I see is a 14 trillion dollar deficit that can't really be repaid, the theft of trillions by bankers and corporations via bailouts, illegal wars, and the discount window. The US spent more on unemployment insurance last month than on ALL FEDERAL EMPLOYEES COMBINED. Yes things are looking great.
Sung to Burl Ives "Silver and Gold."
http://www.youtube.com/watch?v=oMlqn_Hjyi8
Thanks for the pep talk Ron now I going to borrow 3x against my 3x longs because ain't nothing stopping us now...
The best set up I have is a ScottTrade IRA account that I can do what I want with it. It has tripled in three years. I dump the 401ks that I have into it when I change jobs, which happens quite frequently since 2000.
Employment is making a small wave - but how many are going back to work at the same jobs for less pay, fewer or no benefits and more hours?