Is the Economy Bottoming Out?

The February jobs numbers were not good, with non-farm employment falling 651,000 jobs and the unemployment rate increasing to 8.1%.  And according to the ADP Employment Report, small businesses cut 251,000 of those jobs. 

But the good news is job losses do not appear to accelerating.  The U.S. economy lost 681,000 jobs in December and 655,000 in January. 

March will likely be another bad month, but the economy should see some benefits from the stimulus package beginning in the 2nd quarter.  Modest, middle class tax cuts will start and government hiring should go up due to federal hiring increases and state and local hiring stabilizing due to stimulus money. 

Some stimulus package infrastructure spending will also start in the 2nd quarter.

According to the Blue Chip Economic Indicators February consensus economic forecast, the economy will bottom out later this year and pick up in 2010. 

Both the World Bank and the International Monetary Fund are also forecasting economic growth in 2010.

Let's hope they are right. 

Comments

[Timothy]

The stimulus will likely not affect the economy. If you look at empirical evidence, any political interaction during recessions do no good. In fact, they sometimes will make things worse. You have to let the market bounce back itself, and if you try to speed it up you can mess up the natural process.

What I am worried about is political constraints. When the economy drops and people freak out the government puts restrictions on business, with focus on banking. People push for this since they want to avoid future recessions. This makes sense, is rational, but does not help. It, too, makes things worse.

If you put in restrictions you will hinder growth. After about 5 to 10 years these restrictions usually are lifted after everyone forgets the emotions tied in with a recession. This is when business booms.

[Dave Chapman]

I sincerely hope that unemployment levels do not increase, here in the UK the numbers are rising daily - with stats showing that those out of work for over 6 months are now regarded as 'completely unemployable'.

I do agree, our government (uk) is intervening way too much and as a result pension plans are close to worthless, very worrying times indeed!

[Business Trends]

I agree with you on the signals of reaching the bottom soon - I would say over the next quarter. Keep in mind that we do not have any validated numbers on what happens in China and India, nor on their stimuli packages. What I forecast - and this is @Timothy - is that the next bubble/bull will be more abrupt and will not take another 8 years to reverse - more like 4 or 5, mainly because of the technology acceleration. More on acceleration on http://www.soliber.net where I will soon link your blog to a post I am currently researching for. Thank you for the information!

[Steve]

@timothy: I look forward to your post.

[Outbound call center]

thanks for sharing good information about economy.

[Stanley]

The recession is already in its 15th month, making it longer than all but two downturns since World War II. For now, everything seems to be getting worse: The Dow is in free fall, jobs are vanishing every day, and one in eight American homeowners is in foreclosure or behind on payments.

But the economy has always recovered. It runs in cycles, and economists are watching an array of statistics, some of them buried deep beneath the headlines, to spot the turning point. The Associated Press examined three markets — housing, jobs and stocks — and asked experts where things stand and how to know when they've hit bottom.