What a week!... and not in a good way. The stock market got on a roller coaster (mostly down), the European contagion spread to France, and economists talked more frequently about a recession. But even in a week like this, there’s always something positive to take away. Here are five pieces of good news:
- Economists have been downgrading their forecasts, but the majority still think the U.S. can avoid a recession. The odds I’ve heard most frequently are between 1 in 3 and 1 in 2 that a near-term recession is in the cards, i.e. a 50 to 66 percent chance that the U.S. will skirt a recession.
- The most recent employment data support that view. Initial jobless claims slipped to 395,000 for the week ending August 6, the lowest level in more than four months.
- Retail sales increased 0.5 percent in July, the strongest performance since March. Excluding autos and gas – called core sales – the increase was 0.3 percent. This beat expectations and means that consumers, who account for 70 percent of GDP, continue to spend judiciously.
- The Dow Jones Industrial Average fell 12.4 percent from its recent peak on July 21 through its close on Thursday. But remember: the market has predicted nine of the last five recessions – a statement attributed to Dr. Paul Samuelson, author of the best-selling economic textbook of all time.
- Doctors reported some success in treating leukemia with T cells, a type of white blood cell, modified to hunt and destroy cancer cells. Although the results are very preliminary, this highlights the tremendous role that healthcare, biotechnology and medical research will play in the global economy for decades to come.
It’s possible for the country to think or legislate its way into a recession, which means that if we have one, it will be triggered by a combination of poor policy decisions here and in Europe and by a crisis of confidence, which is exactly what caused the stock market correction. For the time being, the economic tea leaves point to continued sluggish expansion, not to another recession.