Here's a better version of the chart in my previous post. I've marked the high and low points for both equities and jobs over the past 10 years. The equity market turned down about 7 months before we saw the job losses that marked the 2001 recession. Equities then turned up about 7 months before jobs began to grow in late 2003. This past year things have unfolded much quicker, and the lag between equities and jobs turning down was only about 3 months.
Equities and jobs have fallen faster this time around, and the economy certainly looks weaker than it did in 2001. But if the lag between the bottom in equities (Nov. 20th) and improvement in jobs is again 7 months (and if Nov. was indeed the bottom in equities), then we would expect to see jobs hit bottom in the next few months and begin to turn up by mid-year. Even if jobs fell another 1-2 million in the meantime, that would still leave us short of a depression. Most recessions are policy-induced, with extremely tight monetary policy almost always the driving force behind the downturn. This recession has been essentially fear-induced; the fear of subprime-related losses, the fear of an imploding banking system, and fear of badly-managed government bailouts. It's happened all very fast, so it could easily end just as fast.
This is all highly speculative, of course, there being way too many variables to forecast with confidence. I post it mainly to show that financial markets can and do lead changes in the real economy. With significant improvement evident in key measures of the health of the corporate bond and stock markets over the past several months, with pessimism rampant, with deflation fear high despite extremely easy monetary policy, and with corporate bond and commodity prices rebounding, I don't think it is unreasonable to think that the economy is in the early stages of bottoming, and that a recovery is possible my mid-year.