Advertisement

SKIP ADVERTISEMENT

Off the Charts

After Jerky Swings, the Economy Begins to Look Nice and Boring

A DEEP recession and the credit crisis led to extraordinary falls in the American economy and perhaps even greater disruptions in financial markets.

Now, both economic and market indicators have returned to what Warren G. Harding called “normalcy” when he was elected president in 1920, after the end of World War I and a subsequent recession.

A lot of worry about the economy remains, and some economists are forecasting a double-dip recession, as occurred in the early 1980s, or a very slow recovery, as happened after the 1990-91 and 2001 recessions.

But as the accompanying charts show, three disparate indicators — covering unemployment, corporate financial distress and stock market volatility — have gone from very high to a little below historical averages.

Abby Joseph Cohen, the Goldman Sachs strategist, told a conference sponsored by George Washington University this week that lessened market volatility was one of the reassuring signs she saw.

She was referring to the VIX index, which uses index options prices to show how much volatility traders expect. Another way to measure volatility is to look at the range of share prices. The chart here shows the differences between the highs and lows of the Standard & Poor’s 500-stock index during three-month periods.

There have been some sharp movements on a few days, but the high from December through February was just 10 percent higher than the low, the smallest range since the summer of 2007.

Similarly, Challenger, Gray & Christmas, an outplacement firm, said that only 42,900 firings were announced in February, the lowest for any month since 2006. The chart shows three-month totals, which are down almost three-quarters from the highest levels last year.

The data “offers more support to the notion that U.S. employers have stopped aggressively firing workers,” said Michael Shaoul, the chief executive of Oscar Gruss & Son, a brokerage and money management firm. “It really is just a matter of time before employers elect to address the fact that their depleted work forces are insufficient to deal with robust and growing order books.”

Those order books are growing nearly everywhere, with the exception of a few troubled countries like Greece, according to surveys of companies released this week by Markit.

The February jobs report from the Labor Department was surprisingly good, particularly considering that blizzards in the East almost certainly depressed the numbers. Manufacturing employment rose in both January and February, the first back-to-back increases since 2006.

After the collapse of Lehman Brothers in September 2008, companies slashed spending wherever they could, firing workers, canceling orders and reducing or eliminating dividends. Now, they are starting to rebuild those inventories and the trend in dividend changes is turning positive.

In February, according to S.& P., 135 companies raised dividends, the largest total in nearly two years. Just 11 percent of the announced changes were negative — eliminations or reductions of payouts. Last March, during the height of the panic, the figure was 82 percent, the highest recorded by S.& P. since it began tallying the figures in 1955.

Some of those increases reflect the fact that companies overreacted when they feared a cutoff of credit and a new depression. But those very overreactions may have set the stage for a recovery that will turn out to be stronger and faster than those after the two previous downturns.

Floyd Norris comments on finance and economics on his blog at nytimes.com/norris.

A version of this article appears in print on  , Section B, Page 3 of the New York edition with the headline: After Jerky Swings, the Economy Begins to Look Nice and Boring. Order Reprints | Today’s Paper | Subscribe

Advertisement

SKIP ADVERTISEMENT