The Economy is Recovering,.....But.....

The latest jobs report showing a loss of 247,000 jobs in July was an important indication that the economic recovery is underway. Of course, the loss of 247,000 jobs is still a national tragedy. But the recovery MUST start with a slowing in the rate of decline (ie, in the rate of job losses).

Virtually every economist has been forecasting a long slow recovery. This makes sense because there are serious head winds for the US economy, including a Trillion dollar deficit, a loss of consumer confidence that is driving a high savings rate, the fall in value of homes, high mortgage foreclosures, and many others. Moreover, as the recovery sets in, the government is going to have to take restrictive actions in the form of higher taxes, interest rates and other measures to control inflation and gradually bring the economy to equilibrium.

But this sharp decline in the rate of job losses raises the question, could they all be wrong? Could this be a V-shaped recovery? We can only hope so. This movement is at least 3-6 months ahead of expectations. Undoubtedly, there are some anomalies in the data, but this is still a big improvement from June.

Of course, now a new game will begin. Who gets credit for this? The President will shift from being responsible for nothing ("I inherited this mess") to taking credit for everything. But the truth is that the government, contrary to popular mythology, has little impact on the economy. Thank god for the miracle of capitalism that has created the wealthiest country in the world.