Is the Economy Recovering? Check the Right Signs
Though some major indicators are down, they're not the ones to watch.
WASHINGTON, July 26, 2009— -- The Dow Jones topped 9,000 this past week but with every sign of progress, there seems to be a setback. On the jobs front, for instance, President Obama has said he expects unemployment to continue to rise in the near future.
Recent reports on consumer confidence also haven't been promising -- consumer confidence levels are still near record lows.
Anne Mathias, the director of research at the Washington Research Group, compares today's many economic indicators to tarot cards.
"There's a huge number of them. It's an enormous deck," Mathias told "Good Morning America." "We keep looking for that one perfect card, that one card that will explain everything to us. And it's just not there."
Some forecasters are revered for their nearly telepathic powers: Legendary Berkshire Hathaway investor Warren Buffet is known as "the Oracle of Omaha" and former Federal Reserve Chairman Alan Greenspan was known as "the Prophet," at least until until the economy unraveled.
For the rest of us, figuring out what the indicators mean can be confusing. Take profits, for example: They're up at banks, but down nearly everywhere else.
One way to understand the cards is to divide them into leading and lagging indicators.
"The lagging indicators are things that have already happened -- they represent reality as it is today," Mathias said. "And the leading indicators -- those are the key cards. That's what the future holds and those are the ones that we really want to look at."
A good sign for the economy is that stocks and stock indexes, which are leading indicators, have surged to their highest levels in seven months.
Two lagging indicators are unemployment and consumer confidence. At 9.5 percent, unemployment is at its highest level in 25 years. Consumer confidence, meanwhile, hasn't budged from its near-record lows in weeks.
"How you feel now is based a lot on what just happened to you. And if you just lost your job and your home is about to be foreclosed, that's going to make you feel bad," Mathias said.
The Ultimate Economic Tarot Card
The ultimate card is the index of leading indicators, which summarizes the key cards in the deck. There's good news there: The index has risen for the past three months.
"I think they're telling us that we have passed through the valley of the shadow of death -- that we are through the worst point," Mathias said. "And we're starting to make our way up back up out of the valley but it's still an awfully long way."
Nobel Prize-winning economist Paul Krugman says, in fact, that the recession probably is over "in a very limited sense."
"The numbers right now look a lot like November 2001, which is the date that retrospectively was considered to be the end of the 2001 recession," Krugman said on ABC News' "This Week With George Stephanopoulos."
"It looks like we're probably going to be seeing positive economic growth (in) this current quarter," he said.
But that growth won't mean good news for everyone. Companies that increased profits have often done so through aggressive cost-cutting, including lay-offs and furloughs.
Krugman noted that even after the end of the 2001 recession, unemployment kept rising for a year and a half.
These days, even as the economy is recovering, "it's going to feel like a recession, because in fact, the job market is getting worse," Krugman said.
ABC News' Alice Gomstyn and Betsy Stark contributed to this report.