Why the U.S. Economy is Improving

"Cool-Hand Obama’s Atmosphere of Certainty… And Other Reasons Why the U.S. Economy is Improving" by v. johns, 2/15/12, 9:58 PM

I was expecting the unemployment rate to be at about 9 percent flat as of January. As it turns out, since October of 2011, the economy has been trending toward a flat 8 percent. I’m not convinced that a slight uptick in unemployment numbers won’t occur over the summer, since oil prices are headed upwards of 4 dollars per gallon. But, now that Europe’s own debt-default problems are being worked out and the debt-ceiling debacle, here in the U.S., has ended -– and now that the the presidential race of 2012 has begun -- firms can reasonably forecast where to focus their capital.

The economy we feel (employment, consumer spending, etc.) is beginning to catch up with the economy on paper (increased domestic output, consumer confidence, etc.). Among countless other reasons, here are some other possible reasons why:

• OBAMA’S COOL HAND (i.e., THE PRINCIPLE OF CERTAINTY): Like it or not, presidents set the tone for how the nation feels. President Obama’s partisan policy and political shifts from consensus-seeking moderate to unapologetic classic-liberal visionary has helped to create an atmosphere of predictability and certainty about our economy’s ability to move forward. From demands for Congress to “Pass this jobs bill!” to a very noteworthy January State of the Union address in which Obama challenged us to help erect an economy that’s “built to last,” as well as executive orders issued to assist students and homeowners, the President’s “with or without Congress” vision has provided corporations, small businesses, families, and individuals with a sense of certainty about what to expect from Washington (i.e., Congress) until well after the 2012 presidential election: nothing.

• PENT-UP CONSUMER DEMAND: The 2011 holiday season unleashed a solid round of consumer demand that should have been tapped into a year or two earlier. But thanks to the Obama administration’s misreading of 2010 midterm election results and to a Tea-Party led assault on our nation’s full faith and credit, based on their own twisted misreading of those election results as a -- get this -- “mandate,” those years have been wasted. And last Spring, the President’s clashes with Speaker Boehner and his wily bunch of tax-religion zealots culminated into the now infamous debt-ceiling debacle, as legislation to aid homeowners, the newly homeless, students and the unemployed fell by the wayside and was replaced by senseless “debate” over deficits and spending. To President Obama’s credit, his 4-trillion-dollar “Grand Deal”, crafted by Vice President Biden, and others, but abandoned by Boehner and Cantor, would have set the nation on solid fiscal footing for years to come. This, according to CBO figures at the time.

• ROBUST HOLIDAY HIRING: Holiday hiring at the end of 2011 was the highest it’s been in awhile. Once the debt-ceiling debacle ended, oil prices fell and the rough tumble in the markets over the Greece-led debt crisis in Europe subsided, with expectations of help from Germany, the stage was set for many companies to plan for what was one of the longest holiday shopping seasons ever. As early as August, some companies, here in Florida, were placing ads for seasonal workers to apply and get trained. These workers contributed to one of the best holiday shopping seasons in what seemed to be ages.

• HIGHER LABOR COSTS ABROAD: Particularly in China. Labor costs over there have risen to the point of factories shutting down. Some American companies have begun insourcing and relocating factories back on American soil. There has also been allegations of trade-secret theft, by the Communist Chinese government, from U.S. companies that produce higher quality goods there - leaving some large companies to reconsider the risks of setting up shop in China to manufacture high-end goods with sensitive trademarks, patents and processes. Apparently, off-shoring and outsourcing have come home to roost. Insourcing is trending, but not enough to write home about.  Watch this trend, but don’t hold your breath.

Though I have been angry about -- or have made light of --corporations “bitching” about uncertainty, in previous posts, the truth is that, like their large corporate counterparts, small and mid-sized businesses really do need to know what the legislative and regulatory climate are going to look like in order to forecast future needs. I’ll drink to that! But the overall point I was trying to make –- that both companies and consumers need to be proactive in stirring up demand  -- still stands. The President has always realized this and the American people are beginning to recognize and respond to his leadership in this area.

In summary: Despite sharp increases in oil prices last spring, a toxic Democrat vs. Republican and Tea Party debt-ceiling “debate” over the summer, a slight downgrade of ratings on U.S. bonds, in the fall, followed by a market-rattling fear of Greece defaulting on its debt (and potentially creating a European debt-default domino effect), the U.S. economy has been holding steady, through it all, but with a slowly-creeping GDP. The underlying improvement in employment numbers, I believe, has come about as a result of enough companies and consumers being unwilling to depend on anything coming out of Washington, as well as some now-or-never pent-up demand that has been tapped into and maintained. In other words, many Americans have begun taking the health of the economy –- and the nation -- into their own hands.

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