It Might as Well be Spring

Spring is the season of rebirth. So it was fitting that Ben Bernanke, chairman of the Federal Reserve Board, in mid-March told "60 Minutes" that he detected "green shoots" of economic recovery. Since then, the phrase "green shoots," which had apparently lain dormant in the linguistic field, has sprouted and blossomed. Analysts and journalists, desperate for any sign of hope, have taken to repeating the phrase "green shoots" as a soothing mantra. Economists are now walking around, eyes fixed on the ground like French rusticshunting for truffles, trying to sniff out signs of growth.

Why the optimism? Banking firms like Wells, Fargo, Goldman Sachs and JPMorgan Chase have pulled off a rare feat for banks lately: making profits. The Federal Reserve's Beige Book, a survey of regional economies, found that several districts "saw signs that activity in some sectors was stabilizing at a low level." In early April, White House economic adviser Lawrence Summers said "this sense of free fall we've been living with will be arrested in the next few months." The University of Michigan's measure of consumer confidence rose in April to its highest level in seven months.

That's thin gruel. But given what we've been through in the past year, it's understandable that we'd seize on any positive signs, be they the "glimmers of hope" President Obama detected in mid-April or Bernanke's "green shoots."

Unfortunately, when it comes to economic gardening, Bernanke hasn't had much of a green thumb. He had the misfortune to take office in February 2006, just as the housing market was hitting its peak. Since then, his diagnosis of the rot eating away at the nation's economic roots hasn't always been accurate. In May 2007, he proclaimed, for example, that "we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."

Economic theory tells us we should be able to detect some green shoots, if only because so much fertilizer has been spread around in the form of cheap capital. But for now, every piece of good news—every green shoot—bears caveats. While Goldman Sachs had a great quarter—it was only because it shifted its reporting calendar to exclude December 2008, in which it rang up a loss, from the results. JPMorgan's Jamie Dimon said things were going so well it might be able to repay the funds it borrowed from the government sooner rather than later—but warned that credit-card debt is going bad.

Of course, where you stand on the economy may depend in large measure on where you sit. And if you sit in New York—whose Beige Book highlights include "ongoing weakness in employment" and "increasingly sluggish" tourism—you're inclined to accentuate the negative. On the Metro-North commuter trains into Manhattan, you can feel the mood dampen when the jobs report hits dozens of BlackBerries at 8:30 a.m.

Meanwhile, signs of a hopeful spring are evident in the region surrounding Chicago, a city that was never too full of itself during the boom and hasn't got too down on itself during the bust. The area's economy has been holding up better, according to the Beige Book. The Second City's diversified economy is less reliant on finance than that of the First City. In March, the Fed reported, "consumer spending improved some and the pace of business spending was little changed." After a long winter, the locals are finally emerging into sunlight. "There are people on the streets again," said Bill Bennett, manager of the Omni Hotel, whose office overlooks the white-hot throbbing heart of Midwestern discretionary spending: the Apple store on Michigan Avenue. Each of the hotel's 347 suites was sold out for the weekend, although prices were up to 20 percent lower than last year. Tourists at the Shedd Aquarium idled on a line longer than a right whale. But for now, the shoots are mostly anecdotal. And plenty of old weeds malinger. Unemployment in the Chicago region is 9 percent. Hog butcher to the world? How about condo hawker to the world? Finished and half-finished towers, standing watch over Lake Michigan, advertise blowout everything-must-go deals. Next to the Apple store on the Magnificent Mile, Elan Furs flogs furs at 60 percent off. The Neiman Marcus and Tiffany were as quiet as the stacks at the University of Chicago's monastic Regenstein Library.

This is how it will go, then. For every green shoot of hope that pokes up through the soil, there will be some other growth that makes you realize there are businesses pushing up daisies. We'll know the recovery is real when some of the measurable activity begins to match the rhetoric, when giant banks write checks to the Treasury to repay the cash they took last fall instead of simply promising to do so, when the rising expressions of consumer confidence begin to ring up at the nation's malls, when the stock market rally is ratified by growth in companies' underlying earnings.

Clearly, we're not there yet. March retail sales disappointed—down 1.1 percent from February—and home foreclosures are on the rise again. And the month is likely to end with a deluge of dispiriting economic data—more big job losses and a rising unemployment rate—along with renewed efforts to ferret out green shoots. We all know what the optimistic gardeners say about April showers.