This is what Morning in America looks like. As the floodwater receded Wednesday and Thursday, government and industry groups this week released a slew of economic data points. All of them generally pointed in the right direction, and confirmed a thesis some wise analysts (OK, me) have been propounding for months. Yes, global growth is slowing and businesses are nervous over faltering exports and political uncertainty. But the innards of the economy—consumer spending, the housing market, the manufacturing sector, and the auto sector (which is the largest single manufacturing and retail sector), are all doing quite well.
Far from being in decline, the U.S. economy is expanding and recovering. The virtuous circle of confident consumers, rising domestic activity and more jobs, all help explain why President Obama is poised to win reelection next week— not in spite of the economy’s performance in the past four years, but because of the economy’s performance in the past three years.
Let’s review. People are feeling better about the status quo. Thursday, the Conference Board reported that its measure of consumer confidence rose to 72.2 in October—the highest level for the year. Last week, the University of Michigan/Thomson Reuters consumer-sentiment index came in at its highest level since 2008. And Gallup’s economic optimism index, while still in negative territory, showed its best reading since 2008. Consumer confidence is bolstered by two important measures: the jobs market and the housing market. Most people don’t own stocks or collect capital gains. But they do have jobs, which account for the lion’s share of their income. And most Americans do own homes, which account for the lion’s share of people’s net worth. Both sectors have been depressed for much of the past several years, but are showing signs of life. Lynn Franco, director of economic indicators at the Conference Board, cited “improvements in the job market as the major driver” of rising confidence.
On employment, Friday’s jobs report will be the big tell. But the preliminary data released Thursday points in the right direction. ADP, the payroll-processing company that reports its own monthly jobs figure, said the private sector added 158,000 jobs in October. Not spectacular, but pretty good. Also on Thursday, the Labor Department said first-time unemployment claims fell to 363,000 last week, down from 372,000 the previous week. Yes, there’s still an unemployment crisis. But here’s the reality: the labor market is probably in better shape today than at any time since late 2007.
The same might be said for housing. As we’ve been noting for months, housing is back. This past year has brought persistently higher levels of new and existing home sales, and, finally, of home values. On Tuesday, Case-Shiller reported that home values rose in August, and are up 2.0 percent from August 2011. On Thursday, the Census Bureau reported that construction spending(PDF) turned in a healthy showing in September—rising 0.6 percent from August and up 7.8 percent from September 2011. The gains were driven entirely by housing. Spending on private residential construction in September 2012 was up an impressive 20.9 percent from September 2011, and total private construction spending was up 14.4 percent from September 2011. And what I’ve dubbed the “conservative recovery” persists. Thanks to continuing austerity measures, public spending on construction fell 0.8 percent in September from August, and was off 4.2 percent from September 2011.
Good news in housing tends to be good news for other parts of the economy: for the labor market, since housing is a labor-intensive business; for manufacturing, since a lot of materials used in housing are made domestically; and even for the car companies, which tend to sell a lot of high-margin pickup trucks when the housing market expands. And here, again, Thursday brought positive news on these sectors. The ISM reported that its purchasing managers index for manufacturing in October was 51.7, a bit higher than September. Any reading above 50 indicates the sector is expanding. This is the 31st straight month of expansion.
The auto industry is both the largest manufacturing sector of the U.S. and the largest retail sector. As go cars, so goes the economy. And so far this year, the auto industry has been gaining speed. On Thursday morning, the car companies began to report U.S. sales for October.
Chrysler was first out of the gate, reporting an increase of 10 percent from October 2011, and the company’s best October since 2007. The company’s revival from liquidation into a functioning, profitable, growing manufacturer is one of the more extraordinary features of the recovery, and helps explain why Obama is doing well in parts of Ohio. General Motors reported results that were less impressive; deliveries were up 5 percent from the year before—although down from September. Toyota reported sales were up 15.8 percent. Despite losing a few days of sales to Sandy, October is expected to be a very solid month for car sales.
So here’s what the economy looked like as Sandy’s winds gained strength: an economy growing at a 2 percent clip, in which consumers are feeling better than they have in ages.
So here’s what the economy looked like as Sandy’s winds gained strength: an economy growing at a 2 percent clip, in which consumers are feeling better than they have in ages. More Americans now have payroll jobs than have at any time since January 2009. Housing is showing sustained gains for the first time since 2006. We’re seeing a change in leadership, from the companies and global businesses that drove growth in 2009 and 2010 to consumer and domestic-oriented companies that are driving growth in 2012.
These trends, though late in coming and late-breaking, are very good news for President Obama and his reelection campaign. A lot of hidden details, anecdotes, and narratives will come into public view in the weeks and months after the election. But here’s an overlooked one that is already apparent. The U.S. economy, with its struggling jobs, housing, and auto sectors, were President Obama’s enemies through most of his term, and were poised to hammer him in the deciding weeks of the campaign. They were supposed to be surrogates for Mitt Romney.
Kind of like New Jersey Gov. Chris Christie. Now, like Gov. Christie, it turns out that jobs, housing, and autos have become Obama’s friend in the fall of 2012—and at just the right time.