The indispensable Calculated Risk blog notes a couple of potentially encouraging signs in the otherwise disastrous 6.1 percent GDP drop in the first quarter of 2009. Consumer spending rose by 1.5 percent during the period. And residential investment dropped by less than 1.5 percent. (Lewis Raineri, a former Salomon Brother vice-chair and one of the financial engineers of the mortgage-bond explosion, now says the domestic housing market is “within shouting distance of a bottom.”)
Why are these numbers possible cause for optimism? Because both personal consumption and residential investment are widely thought to be important contemporaneous indicators of the performance of the economy. And they are in far better shape than those measures that typically lag real-time economic developments, such as equipment and software purchases, inventory changes, non-residential structure investment, and unemployment.
On that last count, however, there is still no good news in sight. As CR notes, “In recent recessions, unemployment significantly lagged the end of the recession. That is very likely this time too.”