A (Somewhat) Hopeful Holiday for the U.S. Economy

As stock prices rise, the Treasury yield increases, and unemployment falls, there is talk of a brighter side for the American economy. With the Dow Jones, S&P 500, and the Nasdaq all gaining the Thursday before Christmas, CNN predicts a good upcoming week for stocks. A good Christmas week isn’t unusual; Schaeffer’s Investment Research says that within the last 100 years, the Down has gained 68% of the time on Christmas week. The less predictable part is that 2013 will come to a close with noticeable gains. Those include a 4.1% increase in GDP, record highs for the Dow and S&P 500, corporate earnings growth, and a rise in the number of individual investors in the stock market.

Many Americans were also able to celebrate new employment this holiday. Claims for unemployment benefits dropped last week by 42,000. That news goes hand-in-hand with reports of a rise in retail sales for November and December. Many economists are less than exuberant about the news, pointing out that seasonal hiring certainly accounts for some of this job growth.  But a Reuters story looked hopefully on the data. “While the holiday season has made recent claims data so volatile it has been difficult to interpret,” it said, “Thursday’s report showed claims continue in a range that supports expectations for faster economic growth next year.” Many other numbers also point toward job growth and a stronger labor market. At 7.0%, unemployment is the lowest its been in five years.

Despite the general good cheer, Jared Bernstein warned in the New York Times that the numbers may not be as good as people think they are. “We’re settling into a growth rate that’s too slow,” Bernstein wrote. He explains that per capita GDP is still $5,000 less than it was before the recession hit and that though employment may be on the rise, it’s not of the full-time variety.  Plus, the numbers that show per capital increases don’t say anything about inequality; most people aren’t seeing the benefits of the growth.

Overall, Bernstein’s analysis suggests that the current economic growth has a big downside for the vast majority of people. “slower growth means more slack,” he says. That translates to “less bargaining power for most workers.”

So should Americans be particularly confident about recent economic growth? The Federal Reserve seems to be. It recently announced a $10 billion reduction in stimulus spending. President Obama has been speaking optimistically, but not elatedly. “We head into next year with an economy that’s stronger than it was when we started the year,” he stated in a recent press conference. But the economy still has a far way to go. “We all know there’s a lot more than we’re going to have to do to restore opportunity and broad-based growth for every American,” he said.

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