Has the Recession Finally Ended?
A rise in retail sales and slowing of job losses could signal an economic thaw.
June 11, 2009— -- The economy continued today to show new signs of life, leading investors to think that maybe the worst of the recession is over.
After a week of little movement on Wall Street, stocks climbed Thursday morning, with the Dow Jones Industrial Average up 70 or so points at mid-morning thanks to a bevy of new government data.
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First, there was good news on the jobs front: the number of Americans filing for unemployment benefits fell last week by 24,000. There were still plenty of folks needing assistance with the total number of people now collecting unemployment benefits rising by 59,000 to more than 6.8 million, the highest since 1967. But the pace at which jobs are being lost is at least slowing.
Today also brought some positive news from the much-battered retail sector. For the first time in three months, retail sales in May rose, by 0.5 percent, according to the Commerce Department. The sales were pushed higher by increased demand for new cars and sales at gas stations. It was the largest increase since sales rose 1.7 percent in January following six straight monthly declines. While this is good news, part of the jump can be attributed to a recent spike in gas prices which isn't helping average consumers.
Also today came word that the number of homeowners facing foreclosure was actually down in May compared with April.
But before anybody celebrates, the number of filings -- on 321,480 U.S. homes -- was still up 18 percent from the same time last year, according to RealtyTrac, an online company that tracks foreclosure properties.
May also brought the third-highest monthly number of foreclosure filings in the company's records and the third month in a row when the number of homes receiving foreclosure notices exceeded 300,000.
These days, any good new on the economy, especially in the housing market, the very place where the recession started, is very positive.
Make no mistake, millions of Americans are still without jobs or struggling to pay their mortgage. But today's news just adds to a wide range of economic indicators in the past few weeks that have shown signs that maybe the worst is over. Here are some of those other positive signs:
Home Sales: The number of homes under contract for sale in April rose 6.7 percent, according to the National Association of Realtors. This was the third straight month of increased home contracts and a much bigger jump than analysts expected. It was the biggest month-to-month increase since October 2001.
Many buyers are taking advantage of depressed real estate prices and an $8,000 tax credit offered to first-time homebuyers. The sales are a good sign for the economy because they show that many average Americans are now willing to get back in the game.
The Stock Market: The Dow Jones industrial average is almost even for the year. Yes, the market is still way down from its October 2007 high but the panic seems to be gone and stocks have steadily climbed out of their decade-long low hit in March.
Auto Sales: Yes , General Motors and Chrysler are restructuring through bankruptcy court, but Americans are starting to return to car dealerships and are making purchases. In May, Americans bought new cars and trucks at a seasonally adjusted annual rate of 9.91 million units.
That's the fastest sales pace for new cars and trucks for this calendar year and a 6.4 percent increase from April's figure. Big ticket purchases -- such as a new car or truck -- show consumer confidence in the economy increasing, a necessary element to get out of the recession.
Consumer Confidence: Americans are regaining faith in the economy and feel as if they have more money in their wallets. The ABC News Consumer Comfort Index hit a high in May as Americans felt more at ease with the state of things. In recent weeks, that confidence has waned slightly, not because of some meltdown on Wall Street but by a rise in gas prices. The average price of a gallon of unleaded gasoline has gained roughly 60 cents since the end of April.
The Global Economy: China's economy shows signs of a strong recovery, in part due to its government's strong stimulus plan. U.S. Treasury Secretary Timothy Geithner on a recent trip to China said the efforts of China and the United States are starting to pay off and the global economy is showing "early signs of stabilization."