With recent reports of a resurgence in manufacturing and employment, the mirage of “green shoots” conjured up by Obama’s spinmeisters and hyped by a credulous news media has mutated into full-blown hallucination.  Check out this upbeat headline from Saturday’s edition of the Wall Street Journal: “Manufacturing, Job Market Show Progress”. This follows on the heels of an equally surreal story in the Journal  a few days earlier suggesting that the yields on Treasury bonds are rising in order to discount a recovery that now looks stronger than anyone had expected. Hello?? Is it possible money has been flowing out of T-bonds simply because relentlessly rising share prices have raised the opportunity cost of being in Bonds?  

Fortunately, one needn’t read too far into these stories to get a picture of what’s really going on. Here’s the second headline that ran just below the main one noted above: “New Unemployment Claims Hit Lowest Level Since September 2008; Orders for Durable Goods Rise 0.2%.”  Ah, now that’s more like it. At that rate, we’ll be out of recession by, oh, 2040.  Headlines aside, and notwithstanding the fact that credible estimates of U.S. unemployment put the rate at more than twice the officially fabricated 10%, the article provided some good reasons to postpone a celebration. For one, even though brokerage-industry shills are touting the prospect of 4.8% growth in the current quarter, a closer look by a hawk-eyed Goldman analyst reveals that nearly half of whatever figure is reported will come from a sharp slowing in the rate at which inventories are being drawn down.  As for the “red-hot” 0.2% blip in durable goods, don’t get too excited, because orders are still down 21.6% for  the year. 

Rosy Headlines 

What gives with the rosy headlines?  As you may have guessed, they’ve always been with us in the worst of times. Which is to say, whenever hard times have grow even harder, newspapers have shunned the truth even more blatantly than usual. Here’s a classic example lifted from the top of a New York Times’ front page:  “In the most optimistic statement on the recovery…it has made yet, the American Federation of Labor today said that business was showing greater vitality than any upswing [of the last two years] and that ‘the last four months of [the year] may well bring the highest level of industrial operations and earnings for any similar period [of the last five years].’ ”  Can you guess when this was written?  It was the summer of 1935 – not exactly a time we associate with a significant upturn in the economy. In fact, there were harbingers of even worse times to come: Germany announced re-armament in violation of the Versailles Treaty, and FDR was laying the groundwork for Really Big Government with the signing of the Social Security Act and the creation of the WPA. The latter came into being in April of 1935 with the Emergency Relief Appropriation Act.  It’s quite possible Obama will be signing a similar piece of legislation come spring, although we doubt the Democrats will celebrate this “75^th anniversary” with the kind of hubris that has surrounded their  health care package. 

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