This Month in 2009: A Little Economic Perspective

Every week, both private and public agencies release reams of economic data meant to shed light on the state of the U.S. economy. Sometimes these reports barely make a ripple in the markets, and sometimes they have a staggering amount of influence. So how do you tell what is really important?

Today, I’d like to take a moment to get a little perspective and review just how far we’ve come from a few years ago.

Now, there are countless different metrics to use in evaluating economic activity, but I thought that it would be appropriate to look at one of the most widely followed measures of economic activity: Gross Domestic Product (GDP). Gross Domestic Product shows the big picture. Annualized quarterly percent changes in GDP reflect the growth rate of total economic output. Of course, this report can move the market up or down, depending on the data. If you only have time to focus on one economic report, this is it.

Year

GDP Growth Rate (4Q)

2009

-6.2%

2010

5.9%

2011

2.8%

2012

3.0%

Above all other economic reports, GDP has captured just how jumpy the U.S. economy was in the years following the financial crisis. You can see that fourth-quarter GDP plunged 6.2% in 2009, only to jump 5.9% in 2010. Since then, GDP has been making modest gains; most recently, the economy climbed 3% thanks to gains in inventory.

Of course, another significant driver of economic activity is consumer sentiment, so let’s take a look at the Conference Board’s index of consumer confidence for the past four February’s. Every month, the Conference Board surveys 5,000 households to figure out consumers’ take on current conditions as well as their expectations for the future. This survey helps forecast sudden shifts in consumption patterns, but only changes of at leave five points should be considered significant.

Year

Consumer Confidence (Feb.)

2009

25.0

2010

46.0

2011

70.4

2012

70.8

This is an exciting trend—consumer confidence has made incredible gains in the past four years. Of course, last summer the index dipped into the mid-40s due to the market volatility, but has since made a complete recovery. Let’s hope that higher gas prices don’t derail these gains.

Finally, if there’s one report that could change the 2012 Presidential Election, it’s the Unemployment Rate Report. This Labor Department announcement consists of two separate reports. First, about 60,000 households are surveyed to determine the unemployment rate. Then, approximately 375,000 businesses are surveyed to determine the number of nonfarm payrolls, average workweek and average hourly earnings figure. Together, these surveys make up the timeliest and broadest indicator of economic activity released each month. It goes without saying that the lower the reading, the better. Let’s see how the labor market has fared over the past four January’s:

Year

GDP Growth Rate (4Q)

2009

7.6%

2010

9.7%

2011

9.0%

2012

8.3%

There has been clear improvement in the past three years. Of course, it’s still a far cry from the days when unemployment fell below 5%. The next unemployment rate report will be released this Thursday, so here’s to a lower reading.

Looking forward to the week ahead, we have six major economic reports slated to be released and I’ll update here if we see any major market-moving news. Until then!

Louis Navellier

Louis Navellier

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