Economic Trends Quietly Turning Obama’s Way

Don’t be distracted by Beck, Massa, and Rahm--there’s quiet good economic news.

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By John Aloysius Farrell, Thomas Jefferson Street blog

With all the chaff about tea parties, and Glenn Beck and Sarah Palin, and filibustering and John Roberts and Eric Massa and Rahm Emanuel, we all might be missing something. The economy is healing.

Mike Dorning, a reporter for Bloomberg, wrote a most interesting article this week. "The political consensus may be that President Barack Obama's handling of the economy has been weak," Dorning wrote. But "the judgment of money in all its forms has been overwhelmingly positive, and that may be the more lasting appraisal."

If the good trends accelerate, and continue, this may not be so bad a 2010 for the Democrats as some Washington wise guys predict, and things may be downright rosy for Obama and the Democrats in 2012.

Dorning counts the indicators.

"One year after U.S stocks hit their post-financial-crisis low on March 9, 2009, the benchmark Standard & Poor's 500 Index has risen more than 68 percent, and it's up more than 41 percent since Obama took office. Credit spreads have narrowed. Commodity prices have surged. Housing prices have stabilized," he writes.

"The economy has also strengthened beyond expectations at the time Obama took office. The gross domestic product grew at a 5.9 percent annual pace in the fourth quarter, compared with a median forecast of 2.0 percent in a Bloomberg survey of economists a week before Obama's Jan. 20, 2009, inauguration," Dorning notes. "The median forecast for GDP growth this year is 3.0 percent, according to Bloomberg's February survey of economists, versus 2.1 percent for 2010 in the survey taken 13 months earlier."

"Productivity grew at a 6.9 percent annual pace in the fourth quarter, capping the biggest one-year gain since 2002."

"Monthly job losses have abated, from 779,000 during the month Obama took office to 36,000 last month. Corporate profits have grown; among 491 companies in the S&P 500 that reported fourth-quarter earnings, profits rose 180 percent from a year ago, according to Bloomberg data. Durable goods orders in January were up 9.3 percent from a year earlier. Inflation is tame, and long-term interest rates remain low."

And when Dorning interviewed some top financial analysts, they had nice things to say about the Democrats in the White House.

"You have to give them--along with the Federal Reserve--a lot of credit," said Joseph Carson, director of economic research at AllianceBernstein LP in New York. "A year ago, there was panic, as well as concern. And a lot of the expectations were not only that we were going to have declines in activity but they would stretch all the way to 2010, if not 2011."

"Mark Zandi, chief economist at Moody's Economy.com, said the public's opinion of the economy is likely to improve as the gains companies have made begin to translate into more jobs and higher wages," wrote Dorning. And "the U.S. may add as many as 300,000 jobs in March, the most in four years, David Greenlaw, chief fixed-income economist at Morgan Stanley in New York, said."

"Zandi said the economic rebound is largely a result of the policies of the White House and Federal Reserve. He cited the bank bailout, the Fed's low-interest-rate policy and support for credit markets, and the Obama administration's stimulus plan, bank stress tests and backing of Fannie Mae and Freddie Mac," Dorning wrote. "When you take it all together, the response was massive and unprecedented and ultimately successful," Zandi said."

"While small businesses still have difficulty getting loans, credit markets have thawed. Spreads on investment-grade corporate bonds have narrowed from 5.13 percentage points on the day Obama took office to 1.63 percentage points on March 8, according to Barclays Capital.

"Rates on 30-year fixed mortgages have dropped from an average 5.20 percent on Inauguration Day to 5.03 percent on March 8, according to Bankrate.com.

"Housing prices, which dropped since 2007 and proved a drag on the economy, have firmed. The median sales price for existing homes in January was the same as a year earlier.

"International currency markets are bullish on the dollar, which has rallied more than 8 percent since Nov. 25, according to the Intercontinental Exchange's Dollar Index. And commodity prices are up more than 32 percent since Obama took office, according to the UBS Bloomberg Commodity Index.

"There's definitely legs in this recovery," said John Silvia, chief economist for Wells Fargo Securities. "There's progress being made."

"We've had a phenomenal run in asset classes across the board," said Dan Greenhaus, chief economic strategist for Miller Tabak & Co. in New York. "If (Obama) was a Republican, we would hear a never-ending drumbeat of news stories about markets voting in favor of the president."

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