This Thanksgiving, we're thankful for the extraordinary American economy.
In particular, we're thankful that jobs are recovering faster than they did after virtually every other financial crisis in recent history. Only Japan did slightly better.
We're thankful that GDP has rebounded much faster than in your average financial crisis.
We're thankful that right now, the US continues to have the most robust economy in the world, even as measured by the comeback in manufacturing.
And that GDP has rebound has been better than everyone else's.
So what in particular do we owe this thanks?
It really comes down to two things
One is good policy. The US more than any other place has combined a mix of aggressive fiscal and monetary policy, without interruption since the crisis ended. Other places have embraced austerity, or pursued inconsistent, start-stop measures, whereas the US has refused to let off the gas pedal.
The other part is even simpler: They're the physical realities of coming out of a downturn.
In our interview with Bill McBride of Calculated Risk, he explains the simple mechanisms that helped lift us up.
I remember when I wrote a post – I think it was in January of 2009 – you know who David Rosenberg is – he wrote a commentary back when what he wrote was free... that auto sales were going to collapse a lot further, and he had some arguments on it and I went and looked and thought “auto sales also can’t go too much further, people have to replace their cars.” And so I wrote this article that says look, auto sales are near the bottom – we were at a 9 million annual rate then- I said there’s just no way – we have to be selling 12, 13,14 million because people need new cars every 5-7,8 years.
The economy recovered because life goes on. Cars break down, people have to buy new ones, someone has to build them, and things just get going again.
It's been the same with housing. Here's Bill McBride again...
That’s the same kind of logic that I used on the housing. You just kind of look at it and go, after a while, there’s all this excess supply that was built, then people pulled back and lived with their parents – but people don’t want to live with their parents very long. That supply gets absorbed. When I go out into The Inland Empire I can tell you...If it’s not mostly growing, it’s getting there. Where I live, as soon as foreclosures come on the market there’s people lined up.
Populations grow, and people don't want to live with their parents forever, and they start homes, and the excess housing inventory gets absorbed.
That's why despite the fact that a few years ago, people were talking about razing all the excess homes, today we have a housing starts chart that's going straight vertical.
At the trajectory this is going on, there are some estimates that residential construction and related industries could start adding a whole percentage point per quarter to GDP.
The task of economic recovery isn't over by a long stretch. There are will way too many people unemployed and underwater on their homes and so forth, which is why the upcoming Fiscal Cliff negotiations are so crucial. It would not be hard to backslide.
But so far we're thankful that compared to how things could be, things are pretty good.
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