Are the clouds parting this Good Friday?
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KAI RYSSDAL: I’m going to stipulate right at the top here that what we’re talking about are incremental bits of news. You read a little bit here, you talk to somebody there… And without all the clamor from Wall Street in your ears, you can take a second to piece them all together.
I’ll give you just one to get things started: The dollar. It’s not like four days a rally make, but remember that Monday the greenback closed at a record low against the Euro — almost $1.60. Today, in very thin holiday trading, a $1.54 to the single currency.
Doesn’t sound like much, but six cents in the world of foreign exchange is practically seismic. Marketplace’s Bob Moon has more on what else might be going right.
Bob Moon: It wasn’t just a Good Friday on Wall Street because the markets took their usual holiday — some leading analysts and economists say there’s been a perceptible change for the better this week. They believe the Fed’s bold actions, along with the Bush administration’s more concerned tone, are giving the financial system the boost it needs:
Mark Zandi: I feel measurably better today than I did a week ago, because policymakers are now fully engaged.
That’s Mark Zandi at MoodysEconomy.com. He’s hopeful the rescue has come just in time to prevent much more serious economic damage. And despite the recent drumbeat of worry over a recession, Zandi remains optimistic.
Zandi: It isn’t that bad yet — the economy’s contracting, and I do expect it to contract further this spring into early summer, but everything’s shaping up to suggest this will be a relatively mild, short-lived downturn.
Indeed, it might as well be spring in the minds of some on Wall Street. Punk Ziegel analyst Dick Bove declared today that the financial crisis is over, and he sees a once-in-a-generation opportunity to buy undervalued stocks.
Dick Bove: I think the real estate situation, by the second half of this year, will have bottomed. There’s a good chance manufacturing will be much stronger in the next two years in the United States, than it’s been over the past five years. Exports are rising. The vast majority of people still have their jobs and are likely to still have their jobs a year from now. This is not a massive, depressive situation.
Other experts point to low inflation. And the unemployment rate, as S&P chief economist David Wyss describes it, remains “pretty darn good.”
David Wyss: Four-point-eight percent is a low unemployment rate. It’s up from 4.4 percent, but historically the average is 5.6 percent, so we’re still doing better than the average. And even with the recession, we think we’re only going to get up to about average.
Wyss says even reports that the stock market has been battered lately have been exaggerated:
Wyss: The beating is not very big relative to normal recession performance. In the average recession, the market drops about 36 percent — we’ve only dropped half as much so far.
The housing market bust is undeniable. Wyss points out, though, that the Federal Reserve’s interest rate cuts have helped make many mortgage resets more affordable, and have even pushed rates low enough to make it worth refinancing many fixed-rate mortgages.
But if the situation isn’t all that bad, how is it that the American people are so pessimistic? Economist Ken Mayland at Clearview Economics points to the drumbeat of scary news.
Ken Mayland: Well, I think I’m going to blame this on the media. Bad news seems to sell easier than good news.
And, ever the optimist, Mayland says one thing he’s learned during his years as an economist is that economies always recover. He says that’s why he remains hopeful the country will see better economic times later this year.
In Los Angeles, I’m Bob Moon for Marketplace.
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