Yes, I am thankful this Thanksgiving
It’s admittedly trite to use the occasion of Thanksgiving to look on the bright side, but given how rarely we cast an optimistic outlook these days, it’s as good a reason as any. With Chapter LXXII of the Middle East conflict playing out in Gaza and the daily soap opera of Washington politics oscillating between sex scandals and fiscal fearmongering, we are once again subsuming the bigger picture to the smaller one and privileging fear.
So, in no particular order, here are six economic points to be thankful for, or at least mindful of, this Thanksgiving:
U.S. housing is on the mend. It took four years, but the long swoon in housing has come to an end. Every housing market metric – new sales, new permits, existing home sales, housing starts and prices – has shown steady and consistent improvement over the past few months. Perhaps the most favorable trend: The inventories of new and existing homes have fallen sharply and is about half what it was at the housing bubble’s peak in 2007. Of course, there are regional variations, and average prices are far lower than at the peak of the bubble. That is likely to be the case for many years. But a fluid U.S. economy requires a functional housing market that allows people to take new jobs or retire. Housing should not be a pillar of economic growth, as it was in the mid-2000s, but it cannot be an obstacle to growth. The housing market has been a barrier. It no longer is.
The euro zone crisis has receded. Between the spring of 2010 and the middle of this year, the escalating sovereign debt crisis in Europe – epitomized by Greece and equally destabilizing for Spain and Italy – seemed poised to create a global crisis at least on the order of what happened in the fall of 2008. That didn’t occur. Partly, this is because of the efforts of the head of the European Central Bank, Mario Draghi, who labored to guarantee the solvency of the financial system. The result has been a dramatic decline in bond yields for troubled nations like Italy and Spain and a degree of relative calm. Make no mistake, the waning of the crisis is not a cure for the euro zone’s ills. Europe still faces a recession that may even engulf Germany. But the worst-case scenarios of market meltdowns, sovereign defaults and global panic are, for now, off the table.
China is resuming its growth trajectory. After a contraction in 2012 that may cause growth to slow to 7 percent, China completed its once-a-decade leadership transition this month with relative ease. Yes, the leadership is confronting public unease over the corruption and venality of many officials, and yes, the path of spend, spend, spend on infrastructure and housing is not sustainable. Yet there are signs that China’s leaders and hundreds of millions in the middle class understand this; hence the aggressive push to reform the party, build a new social safety net, encourage small businesses and ease the grip of state-owned companies to invigorate the domestic economy. No one knows how this will evolve, but growth next year looks to be stronger and more balanced than it has been in many years.
Unemployment has crested in the United States. For much of 2012, the unemployment situation in the United States has been stable. Far fewer jobs have been created than many had hoped. The 140,000 or so jobs added on average per month barely keep pace with labor supply and new workers joining the workforce. The unemployment rate hovers at 8 percent, which is wonderful compared with Spain’s 25 percent rate, but far higher than Americans expect it to be. The job market, however, is steadily stabilizing, even though there is a structural unemployment challenge that is connected to education levels, globalized labor, and technology efficiencies. Americans are still in some denial of the portent of these changes, and political debate suggests a disturbing belief that the U.S. is only one set of good policies away from massive job creation. The truth may be more complicated, with a generation of unemployed and underemployed workers whose skills are mismatched to an evolving world. This is an issue that will not fade anytime soon, but it is not likely to get worse, barring further global deterioration.
There is a consensus about what needs to be done. A vast gulf may separate America’s political parties – not to mention euro zone nations – but there is less fundamental debate than meets the eye. Almost everyone in the United States agrees that the long-term trends of healthcare spending and defense spending need to be tamed, and there is increasingly less debate about the need for more revenue. Yes, in both Europe and the U.S., there is a divide between those who argue for more pro-growth spending and those who advocate for austerity, and that will keep the fires of debate burning. Yet few disagree about the nature of the challenges.
People outside the media and the Beltway are going about their lives. The echo chamber of politics and the media ratchet up conflict. Stories of compromise and the rolling up of sleeves are inevitably less gripping than stories of brinkmanship and posturing. Conflict is the ultimate drama. So we attend more in our public space to conflict and problems. But people in America are far more focused on families, careers and passions. That provides a foundation for the economy that is often more stable than the forces assailing it. Any journalist can find stories of crippling economic uncertainty forestalling business creation or crimping investment. But it is equally easy to find stories of small business owners getting $100,000 loans to open bakeries or cafés or design firms, or college grads developing niche apps, or retirees adding meaningfully to their communities for modest or no pay. Those stories aren’t usually “news,” but they provide essential ballast.
It’s easy to say, “Yes, but …” to each point above. None of these points negates the well-known risks ahead. There is a list of events that could go wrong, which most of us can recite, from runaway inflation to recession to collapse. In our culture today, however, a litany of problems is met with an “amen” chorus, with people piling on other issues. A listing of the positives is often met with anger. There is no denying the troubling economic prospects for millions of people in many communities. But we can appreciate strengths without ignoring weaknesses, and on Thanksgiving at least, we can genuflect to the former and celebrate what we have.
PHOTO: A turkey waits in its pen at the Seven Acres Farm in the Boston suburb of North Reading, Massachusetts, November 26, 2003.