Thursday, December 3, 2009
I realize that the big drop in unemployment claims is now old news, but nevertheless it is still impressive and a reminder that the healing forces in the economy are still very much alive and well. Yes, there is a lot of room for improvement, but let's not let the perfect be the enemy of the good. Weekly claims have fallen by one third since the high last March, and today are only 40% above what might be considered "normal." If nothing else, this is hard evidence that there has been some significant improvement on the margin in economic conditions.
For those who are still skeptical of this year's strong advances in equities and corporate bonds, I would note that one year ago the market fully expected that today the economy would be in a deep recession, engulfed by deflationary forces. Last March, when the S&P 500 was 40% lower than it is today, the market upped the ante to include a mega depression and a federal government that would know no limits to its expansion or its appetite for the world's savings. Instead, the economy is now in the early stages of a recovery, a stabilization of the labor market is within sight, and the Obama administration's initiatives are being seriously challenged on several fronts. Changes on the margin are what drive markets, and we have seen a gigantic change for the better over the past year.
Posted by Scott Grannis at 8:47 AM