The Breeders' Cup races are coming up this weekend at Churchill Downs in Louisville, Kentucky, and many bettors around the country will be trying to hit the Pick Six in which you try to select the winners of the top six races in a row. It is devilishly hard to do because all of the races have large fields, offer large purses and are highly competitive. A Pick Six payout can easily hit six figures, sometimes seven.
But we got the economic equivalent of the Pick Six last week when our economy was suddenly inundated with a tide of good news such as we have not seen in a long while, fostering a major advance in the Dow Jones Industrial Average. The Pick Six winners were:
- News of a European debt deal that promises to defuse, or at least delay, an economic cataclysm that could pose a serious threat to the Euro. The banks will take a 50 percent loss on Greek debt, avoiding a technical default, and the big countries agreed to leverage the European Financial Stability Facility to the tune of1.3 trillion.
- The U.S. economy grew a solid 2.5 percent in the third quarter, not enough to start generating jobs, but enough to ease fears of another recession.
- Investment spending in the third quarter roared ahead at a 17 percent annual rate - an indicator of more economic growth to come.
- Consumer spending in the third quarter was a decent 2.4 percent annual rate. Most of that came from reducing the savings rate, which fell from 5.1 percent to 4.1 percent, but right now we need consumer spending more than saving.
- Third quarter corporate earnings were robust with two-thirds of corporations reporting strong growth. Business continues to do well despite the overall economic malaise.
- Last but not least, the latest news from China is of strong economic growth. We tend to think of China as our main economic competition, but like China we also depend on exports to fuel our domestic growth. Continued growth in China augurs well for economic expansion around the world.
It is still too early -- much too early -- to break out the champagne. But given the spate of negative economic news we have been drowning in lately, this sudden burst of sunshine is to be savored. I do not believe we will return to the go-go days of the dot com or real estate bubbles, nor should we want to. But if we can make some prudent long term decisions to reduce our debt and embrace sensible pro-growth policies, we may yet turn the corner on this thing and work our way back to modest but steady growth sufficient to start putting the unemployed back to work.
Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements.