New jobless claims rose to 650,000, guaranteeing another month of heavy job losses and sending the number of Americans continuing to draw unemployment insurance benefits to a record 5.5 million, fourth quarter 2008 GDP growth was revised down again to a negative 6.3 percent and the first quarter of 2009 will be just as bad, and the Treasury Secretary debuted an ambitious plan to regulate the financial sector that normally would send Wall Street into a frenzied riot of mass conniption. And yet, in spite of all this, traders started off Thursday feeling optimistic, sending stock indexes jumping immediately higher.
Where the stock market starts doesn't tell us where it will end. But the blithe disregard of news that a year ago would have had traders checking the windows to see whether they could be easily jumped out of tells us one of two things: Either Wall Street is so desperate for an economic turnaround that it will treat any news as good news, or the U.S. economy might actually be, if not reaching the bottom of the recession, at least slowing the pace of its descent.
The two best appraisals of where we might be, with respect to a potential turnaround, that I've seen so far come from Time's Justin Fox and U.C. San Diego economist James Hamilton. Fox writes that "we are in fact seeing the beginning of the end of this recession in the U.S.," but "the recovery will be fitful and problematic..." Hamilton is more circumspect, concluding only, after a review of the data that, "I take some encouragement in the news of the last two weeks."
How the World Works accepts Calculated Risk's analysis that, despite the upward ticks, on a month-to-month basis, in existing home sales and new home sales reported this week, the housing market has yet to hit a bottom. Prices are still in freefall. February is normally a better month than January, but this year, not only was the improvement in sales numbers smaller than usual, but viewed historically, February 2009 was one of the worst months for the housing sector ever, losing out only, since records started being kept, to January 2009.
So, there's ample room for pessimism. And indeed, in the time it took to write this post, the Dow slumped from a 100 points up to 15 points up. Maybe everyone's had time to digest Geithner's new plan to regulate Wall Street, and realized that, whoa, if the Obama administration follows through, it might not be so easy to make mad money like thieves the next time around.