With just two months until the first primary contests officially kick off the race for the White House, politicians have unleashed a flurry of proposals designed to fix the ailing economy, encompassing everything from tax-code reform to student loan relief to a large-scale mortgage refinancing initiative.
And it sure seems like we need it, right? A string of bad economic data and policy failures in the first half of 2011 have severely weakened consumer and business confidence—more than three in four Americans now believe the country is on the "wrong track" according to a recent Rasmussen Reports poll. That attitude has made virtually everyone clam up and become super-cautious when it comes to spending, a persistent obstacle in this non-recovery.
Not only do Americans feel uncertainty about the U.S. economy in general, plenty of doubts exist when it comes to their own financial situations as well. Even with a weak "recovery" taking place, personal income growth has receded to levels not seen since 2010, making Americans feel less wealthy and increasingly pessimistic about the future.
But while no one is arguing the economy is in tip-top shape, a slew of recent data shows encouraging progress and support for the argument that although weak growth might be in the future, a double-dip recession most likely isn't. Here are a few reasons why things might be looking up for the U.S. economy:
Gross domestic product. After a series of gloomy forecasts for the U.S. economy, real gross domestic product—a measure of the output of goods and services—increased at an annual rate of 2.5 percent in the third quarter of 2011 according to the advance estimate released by the Bureau of Economic Analysis Thursday. In the second quarter, real GDP increased 1.3 percent and first-quarter numbers came in at a measly 0.4 percent. While economists emphasize that 2.5 percent isn't exactly robust growth, it is a huge improvement from first- and second-quarter estimates and a sign that the much-anticipated economic recovery could be finally finding its footing. But, other economists warn that growth above 2 percent doesn't appear to be sustainable. "Business investment, inventory, and exporting hold the key to how much growth can be anticipated through the first half of 2012," Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, said in a press release Thursday.
In any case, simply the perception that things are getting slightly better could generate a rebound in consumer and business confidence, which could ultimately help steer the economy further away from the cusp of another recession.
Housing. Pretty much any way you slice it, the housing market is in the dumps. And while 2011 is shaping up to be one of the worst years on record for the single-family housing market, green shoots might be growing elsewhere. It seems counterintuitive given the constant talk of overbuilding contributing to the massive housing bubble, but a rebound in multifamily unit construction—think townhomes or apartments—has given the housing market a shred of hope to cling to.
Thanks to building activity in that sector, housing starts jumped 15 percent—the best reading in 17 months, according to IHS Global insight—to a 658,000 annual rate. Single-family starts were up 1.7 percent, according to IHS, a modest but encouraging change.
According to IHS forecasts, a housing market recovery initially driven by an uptick in multi-family unit construction through 2013 will eventually make way for improvement in the decimated single-family home space as pent-up demand builds.
In some ways, that demand may be reappearing already. On the heels of strong gains in August, existing home sales—while down 3 percent in September—clocked in at more than 11 percent above figures from September 2010, according to the National Association of Realtors.
"Existing-home sales have bounced around this year," NAR chief economist Lawrence Yun said in a press release. "Even so, the volume of successful buyers is higher than a year ago and is remaining fairly stable—this speaks to an unfulfilled demand."