The Good

Most of these are in the real estate sector, as they should be, since real estate began the recession and it will end it as well. Existing home sales, new home sales and pending sales  have all risen steadily for the past six months, suggesting that the housing slump is over. The fact that a great many of these sales are distressed properties is not an issue since a sale of any kind represents a home removed from inventory and thus an improvement in the market.

But there are others. The Dow-Jones Industrial Average bottomed out in March and has risen since. Historically, the Dow turns six months before the economy, which should mean that the recession is ending in September. Similarly, the Index of Leading Indicators in July was 12 percent above its low point, another change that historically coincides with the end of a recession. Finally, consumer confidence has risen significantly from its low, suggesting that consumers are ready to come back into the market.

Yet, not is all rosy. The numbers that depict a continuing recession are there and they are important. The biggest of these is employment. We have consistently shed jobs and will continue to do so for a while. Until, the economy starts creating jobs, it cannot grow in any meaningful way. Granted, job loss numbers have been less bad as the months go on, but they are still negative and this is a bad sign.

Consumer spending is also weak. Consumption is more than two-thirds of GDP and unless consumers spend, the economy will not grow. Retail jobs languish, commercial real estate weakens and a negative spiral ensues. We need consumption to grow if the economy is to grow.

The Irrelevant

The most prominent indicator that gives no clear information is the unemployment rate. Yes, it has risen dramatically, and, yes, this is a bad sign, but we don’t know why it has gone up. The unemployment rate can change because of layoffs, or because the labor force has grown or some combination of the two. Similarly, it can fall if employment falls by less than the shrinkage in the labor force as people get discouraged and give up. See the problem? Ignore the unemployment rate; it tells you nothing.

Real estate prices are another irrelevant indicator. Ina real estate cycle, prices always follow sales. When the market turns up, prices will continue to fall for some time until buyers and sellers adjust their expectations to the new reality. If you wait for prices to turn, you’ve missed the market. Another problem here is that even the best of the price measures—e.g. the Case-Schiller Index—covers only a sliver of the market and doesn’t tell you much about what’s really going on. But the media focus on prices. They do so because most correspondents cover the financial markets as well as real estate and in the financial markets prices are everything; in real estate units are everything.

So there is it, your complete guide to economic news. Use it wisely and you will confound your enemies and amaze your friends!