Brighten their holiday. Enrich their everyday.Give The Atlantic

The Case Against Economic Optimism

Our fragile recovery is beginning to wobble. The latest GDP reading was an anemic 2.4%. Businesses aren't hiring, and they're blaming Congress. Democrats are hamstrung, and they're blaming Republicans. Republicans are defiant, and they're blaming the White House. And the White House ... well, it still blames President Bush.

Things are rotten in these United States, but fortunately for the optimist alive in all of us, Daniel Gross is still writing articles. For months, Gross has played the role of Mr. Fantastic opposite the Dr. Dooms of the economic world (eg: Nouriel Roubini and Niall Ferguson). Gross radiates optimism week in and week out, while Nouriel and Niall have made a telegenic fetish out of negativity.

I don't always agree with the metronomic hopefulness of Gross' analysis, but I read it because (a) he's very smart and (b) he might be right. Here he takes on the poor GDP figures:
The theme for the past year of recovery has been: a tale of two economies. Businesses that are connected to trade, to the global economy, and to business services are comparatively strong. The more global and less dependent on the United States you are, the better. We've seen excellent earnings from railroads, delivery companies, coal mining, and even automakers. But businesses and industries that are tethered exclusively to U.S. consumers, like the grocery chain Supervalu or housing, remain weak.
A fine point, but if I'm reading him right, Gross is essentially acknowledging that our recovery isn't in our own hands. It relies heavily on an uncertain global economy, just as Europe embarks on an experiment of austerity. The dollar is strong against the euro, the pound, and the renminbi, which threatens exports in the coming quarter.

As my colleague Dan Indiviglio shows in this awesome chart of economic indicators (click it for a clearer picture) there's no great news from July except exports and new home sales, and both are expected to face headwinds in the fall. I want to believe Daniel Gross' story. More importantly, I want consumers and businesses to believe his story so they start buying and hiring. Unfortunately for everybody, it still feels counter-intuitive to be an optimist.

Month in Review 2010-06 v2.PNG