Daniel Gross

Schwab’s Sonders: Economic Lift ‘Carrying Over’ Into New Year

Contrary Indicator

After a slow and choppy start to 2011, the U.S. economy ended the year on somewhat of an upswing with many better-than-expected economic reports, including initial jobless claims that fell below the key 400,000 mark. Today's first weekly employment picture of 2012 didn't disappoint.

The private sector added 325,000 jobs in December, according to ADP's National Employment Report. That's well above the expected 178,000 number and higher than November's gain of 204,000 jobs.

Plus, Americans who filed for unemployment benefits for the first time fell by 15,000 last week — the fourth straight decline in five weeks.

"Hmm, looking at ADP jobs data and unemployment claims, it's almost as if [the] economy coming back better, stronger, and faster," tweets Yahoo! Finance's economic editor Daniel Gross. "[But] let's not make too much of [the] ADP number - it tends to overshoot actual data, especially in December."

All eyes are certainly set for tomorrow's government assessment of the unemployment situation in December. The U.S. unemployment rate fell to 8.6% in November, mostly due to the fact that many people dropped out of the job hunt. (See: November Jobs Report: Curb Your Enthusiasm)

Gross, who is generally optimistic about the overall state of the economy, sat down with Charles Schwab's Chief Investment Strategist Liz Ann Sonders, to discuss her 2012 economic outlook. (See also: Schwab's Sonders: Investors Should Be Optimistic About 2012)

"I'm relatively upbeat," says Sonders in the accompanying clip. After many one time-time factors that drove weakness in the beginning of 2011, like Japan's tsunami and the Arab Spring which shocked oil prices, "we got the lift in the second half of the year and I think more of that is carrying over into this year than I think the consensus believes."

To support her thesis, she cites the following in her most recent insights entitled "True Reflections … on 2011 and 2012":

Manufacturing & Services: The Institute for Supply Management (ISM) manufacturing and non-manufacturing surveys have both rebounded sharply from their summer lows. Over the past 60 years, the ISM has proved itself the best single short-term leading indicator of US economic growth.

(Today's ISM report shows manufacturing expanded by the most in six months. The index rose to 53.9 last month from 52.7 in November.)

The Consumer: The Conference Board's measure of consumer confidence has recuperated to an eight-month high…. The news about consumers has improved, too. If you're concerned the decent holiday sales were on the back of rising debt, look no further than the credit card delinquency rate, which declined in the most recent month (November) to a record low, and has plunged to less than half its recession peak.

Housing: We're even seeing a light at the end of the housing tunnel. The pending-home-sales index surged more than 7% last month to its best level since April 2010. At that point, housing was artificially supported by the homebuyer tax credit. The last time pending sales were at the current level without government support was June 2007.

And then there are U.S. auto sales which took off again in 2011. Automakers sold over 1 million vehicles last month, which is 8.7% more than the total sales in December of 2010.

That's not only a good sign for the automakers, (who all reported healthy double-digit sales gains last year), but also for the overall economy because more sales means increased demand for auto supplies and labor.

Are you as confident the economy will rebound in 2012?

Tell us what you think in the comments below or on our Facebook page. You can also follow Dan on Twitter @grossdm or email him at grossdaniel11@yahoo.com.

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