Here is an interesting article that I found in the Wall Street Journal. I think it is appropriate to review because the media at this point is fueling the fire of pessimism that the US economy is in recession. I think this sentiment has spread to water-cooler and coffee talk assumptions that things are worse than they are. This article is heavy with economic statistics and figures, but here are some of the worthy quotes:
It is hard to imagine any time in history when such rampant pessimism about the economy has existed with so little evidence of serious trouble.
These declines [ed: a one-month drop in retail sales of 0.4%] are part of the normal volatility of the data, caused by wild swings in oil prices, seasonal adjustments, or weather. Over-reacting is a mistake.
A year ago, most economic data looked much worse than they do today.
Housing is now a small share of GDP (4.5%). And it has fallen so much already that it is highly unlikely to drive the economy into recession all by itself. Exports are 12% of the economy, and are growing at a 13.6% rate. The boom in exports is overwhelming the loss from housing.
Lost in the pessimism is the fact that 20 out of 24 S&P 500 technology companies that have reported earnings so far have beaten Wall Street estimates.
Models based on recent monetary and tax policy suggest real GDP will grow at a 3% to 3.5% rate in 2008, while the probability of recession this year is 10%.
Federal Reserve Chairman Ben Bernanke recently estimated as a $100 billion loss on subprime loans would represent only 0.1% of the $100 trillion in combined assets of all U.S. households and U.S. non-farm, non-financial corporations. Even if losses ballooned to $300 billion, it would represent less than 0.3% of total U.S. assets.
[M]onetary conditions are not conducive to a collapse of credit markets and financial institutions.
The good news is that the U.S. financial system is not as fragile as many pundits suggest. Nor is the economy showing anything other than normal signs of stress
This is at least a good counterpoint to the buzz that is eroding the layman’s confidence in the economy.
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