America is Back!, Newsweek declares this week.
Cover-story author Daniel Gross says the economy is making a strong comeback, defying the odds and surprising the naysayers. “The turnaround we’ve had since [Lehman Brothers’ bankruptcy], while not completely satisfying, has been pretty remarkable,” he tells Henry Blodget in the accompanying clip.
A combination of unprecedented government intervention matched by rapid restructuring and increased productivity in the private sector has resulted in an economy stronger than anyone would have imagined just 18 months ago, Gross argues. Although the National Bureau of Economic Research – the official tracker of recessions – continues to wait to officially declare its end, Gross dismisses their hesitation, saying economic forecasters “have consistently underestimated the rate of economic growth.”
Gross points to several factors to back his case:
- The economy is growing. The U.S. economy has gone from shrinking at a 6.4 per cent annual rate in the first quarter of 2009 to growing at a rate of 5.9 per cent at the end of the year.
- Bull market. The Dow Jones Industrial Average is now hovering around 11,000, having rebounded 70% off the bottom.
- Job creation. The unemployment rate remains stubbornly high; however, 162,000 jobs were created in March. That’s a long way from losing 800,000 per month at the height of the panic. Job growth “is going to be slower than many people would like it to be but I think it’s going to be faster than many of the professional forecasters are expecting it to be,” he says.
- Productivity. From the fourth quarter of 2008 to the fourth quarter of 2009, productivity rose 5.8 per cent.
True, too many people are out of work and the housing market remains stuck in the mud but “we’re having this recovery in spite of housing,” Gross notes.
Magazines don’t have a great track record with their predictions. Business Week’s “The Death of Equities” cover story in August of 1979 ushered in the greatest stock market bull run in history. Gross isn’t worried about the “jinx”, noting he and his colleagues at Newsweek have been prescient during the crisis. In January 2008 they were correct in reporting the country was headed for recession and were on the money again when they called an end to the recession in July of last year.
Let’s hope he’s right again.
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