Here's 20 Reasons To Be Wildly Optimistic About The Economy


Step back from the daily pessimism and you’ll see a growing list of things going right in the economy, for those watching the macro data.

While problems abound, we’ve always had problems, and both the U.S. and world are nevertheless rebounding from the depths of the financial crisis.

If you’re complaining about U.S. housing still being weak, well it should be.

Prices went far too high and far too many houses were built. As Warren Buffett said in his latest annual letter, low home prices mean cheaper homes, which isn’t all that bad. He also sees a recovery on the horizon.

If you’re complaining about employment, you have a valid concern since it can hit your life hard, but you need to remember that the employment situation which we experience says little about where the economy¬†is going and says a lot more about simply where the economy came from.

That’s because it is no secret in economics that employment is a lagging indicator.

So here it is, a compilation of ‘the bright side’. Take it in, balance it against the world’s problems, and ultimately be your own judge.

Admit It, The Recession Is Over And You’re About To Get A Job Again >

U.S. GDP has staged a huge rebound.

The U.S. GDP is growing. It jumped at a 5.9% annualized rate in the fourth quarter of 2009, which yes is expected to slow down, but most expect it to remain positive around the 3% level this year.

It's not just the U.S., the entire world is rebounding.

Source: Goldman Sachs

Some think the GDP is an illusion, but we'll show you that's not the case.

The credit crunch has eased.

Source: Goldman Sachs

Bond default rates have peaked.

Source: Goldman Sachs

U.S. non-financials are now delevered and have very strong balance sheets.

Source: Citi

The U.S. manufacturing industry is expanding.

Source: ISM

Industrial production has posted a V-shaped recovery.

Source: Econompic

Services are rebounding as well.

For the Non Manufacturing Index below, anything over 50 indicates expansion.

Source: ISM

Exports have surged back.

Source: DOC

U.S. exporters are now worrying that there aren't enough ships.

'There are not enough ships or containers to handle the exports that the world wants to buy from us. This situation is becoming more dire by the day,' said Peter Friedmann, executive director of the Agriculture Transportation Coalition, a lobbying group.


Some exporters facing delivery deadlines resort to air freight, despite a cost that might be 50% higher. 'It's a great opportunity for us,' said Jess Bunn, a spokesman for FedEx Corp., which is doubling its fleet of planes serving U.S.-Asia routes. United Parcel Service Inc.'s international air-shipping business rose 12% in the fourth quarter.

Source: WSJ

Around the world, Idle ships are coming back online in response to a global recovery in trade.

'According to AXS-Alphaliner, the idle fleet has been further reduced over the last two weeks, from 495 vessels of 1.24m TEU to 474 vessels of 1.22m TEU (9.3% of fleet capacity) currently. AXS-Alphaliner expects lower idle count going forward, as new services will be launched on the Asia -- Europe trade (capacity on this route expected up 7%) and there is also a pickup in demand for smaller ships to service intra-regional trades.'

Source: Fearnley Fonds via Business Insider

Air freight has come back strong.

'International cargo demand showed a 28.3% improvement with only a 3.7% increase in capacity (see green line in graph above). This pushed the cargo load factor to 49.6% which is a step-change from the 40.1% recorded in January 2009.'

Source: Carpe Diem

Oil demand is growing as well... and there's a major recovery underway in U.S. drilling.

Domestic U.S. activity is surging:

'The optimistic outlook we highlighted late-last year may have actually been on the conservative side given the pace of the recovery so far. In fact, over the last four months, the U.S. land rig count has increased more rapidly on an absolute basis than in any other four-month period over the past decade. Furthermore, the rig count has only posted weekly decreases four times in the 37 weeks since bottoming. Frankly, the magnitude of the improvement in recent months has exceeded the expectations of many industry observers, ourselves included.'

The IEA and OPEC just hiked their demand forecasts as well.

Source: Rigzone, Business Insider

Corporate profits have spiked, and historically, employment has followed such spikes.

As shown here, since 1980, employment (in red) has fallen after corporate profits (in black) have risen, and vice versa. The relationship is pretty clear.

Problem is, there's about a one-year lag between the two trends.

Given the recent rebound in corporate profits the U.S. has already experienced, there is a reasonable chance that employment will get better over the coming twelve months.

Source: Business Insider, Citi

U.S. small businesses just started creating jobs again.

'Although overall employment has declined since December 2007, the most recent monthly change in the Intuit Small Business Employment Index is positive. While this month-over-month change is small, up 0.2 per cent on a seasonally adjusted basis, it continues an upward trend that began around the middle of 2009. Employment grew nearly 0.8 per cent over the past eight months, which is 1.1 per cent at an annual rate. This translates into nearly 40,000 new jobs for February 2010 and nearly 150,000 new jobs since June 2009.'

Source: Intuit

Most manufacturers are now planning to hire.

On the jobs front, while U.S. manufacturing employment isn't expected to return to 2007 levels until 2011 or 2012, 82% of manufacturing companies are already planning to hire new staff in 2010, according to a survey by manufacturing industry firm Prime Advantage.

In a U.S. manufacturing surveys from the American Machine Tool Distributors' Association (AMTDA), '67 per cent of respondents reported feeling more optimistic about the economy compared to 2009, and that 64 per cent were more optimistic about the financial prospects for their own companies. In addition, in ranking their own companies' financial prospects for 2010 on a scale of 1-10, with 10 being most optimistic, 51 per cent ranked themselves at 7 or greater.'

Source: Business Insider, Automation World

The monthly unemployment rate might have already peaked.

Long-term unemployment is falling.

Unemployment claims are falling.

Even the TrimTabs guy stopped complaining.

TrimTabs is the research firm that ALWAYS comes out and slams the BLS reports for being too rosy in their assumptions.

Well, maybe they realise that they have to throw some curveballs from time to time just to keep us guessing, because today they actually are singing a different tune.

'In an unusual occurrence, TrimTabs February employment estimate, which uses real-time daily income tax deposits from all U.S. taxpayers to compute employment growth, was nearly equal to the Bureau of labour Statistics (BLS) estimate. While TrimTabs estimated the U.S. economy shed 30,000 jobs in February, the BLS reported the U.S. economy lost 36,000 jobs. February's job losses demonstrate that while the labour market is still weak, monthly job losses are steadily declining. In fact, we believe the U.S. economy will add jobs in March as the U.S. government begins to hire an estimated 1.2 million temporary census workers in the next three months.'

Source: Joe Weisenthal @ Business Insider

Finally, on the housing front, same store sales are rising at Home Depot, for all regions.

More importantly, Warren Buffett sees a housing rebound in 2011, and thinks the worst of the downturn is behind us.

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