10 Reasons to Feel Good About the Economy

Either a short, shallow recession or slow growth sounds a whole lot better than depression or financial panic.

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Want a bit of good news? Hey, I've got 10 of them for you.

1) "The worst of the crisis in Wall Street is over," Warren Buffett told Bloomberg Television over the weekend. I guess the Oracle of Omaha is in the "recession, not depression" "club.

2) I got an E-mail from one high-profile Wall Street economist who said that first-quarter gross domestic product may have expanded at nearly twice the 0.6 percent rate that the government estimated last week. And his whisper estimate for 2Q is even stronger.

3) The service sector is growing again. The Institute for Supply Management reported this morning that its nonmanufacturing index rose to 52.0 in April from 49.6 in March. Readings above 50 indicate growth. Some perspective from Michael Darda of MKM Partners (bold is mine):

At a reading of 52, the ISM Non-Manufacturing Index is at levels consistent with 2% real GDP growth.... During the 2001 recession, the ISM Non-Manufacturing Index averaged 48.1 while the employment component averaged 45.7. Since 2001 was one of the mildest recessions on record, and the current data on the services economy is well above the average for the 2001 recession period, the "recession" now underway either looks exceptionally mild or simply not happening at all.... If we don't see negative growth between Q407-Q208, it's not likely to occur (the rebate checks will puff Q2 growth up while the lagged effects of massive monetary easing likely will take hold beginning in Q3 and Q4). While the economy isn't out of the woods just yet, it would appear that the exceptionally high degree of confidence by most forecasters and pundits that the U.S. economy is in recession may turn out to be mistaken.

4) The Intrade betting market puts the odds of recession—defined as back-to-back quarters of falling GDP—at 30 percent, down from close to 80 percent earlier this year.

5) Bruce Kasman of JPMorgan Chase:

The first readings from firms in April (ISM, payrolls) do not suggest that drags are intensifying or broadening. The economy is unlikely to fall into a hole so deep that it will contract despite the infusion of tax rebates. We continue to see GDP growth in slightly positive territory in the middle two quarters of the year as the boost from rebates offsets a mild recession dynamic.

6) The four-week average of initial jobless claims fell to 364,000 last week, indicative of weakness...but not an economy that is falling off the cliff," opines Don Rissmiller of Strategas Research.

7) A few interesting factoids from economist Jim Glassman of JPMorgan Chase:

Subprime adjustable mortgages that were going to reset from 7% to 10%, for example, now will reset from 7% to only 8% and that substantially tempers the reset shock. Investor risk appetites are beginning to return. Most encouraging, 10-year Treasury yields have climbed from 3½% to around 3 7/8% since [March] and JPMorgan's index of noninvestment grade long-term debt costs have fallen from 842 basis points above 10-year Treasury yields on March 17 (the recent peak) to 675 basis points last week.... At the same time, the Wilshire 5000 index of all publicly traded US stocks has rebounded 11% from the early-March low and is down only 9.8% from the record high reached last October.

8) Last week's jobs numbers were also encouraging to market strategist Ed Yardeni:

How's the US job market looking? Recessionary, though still consistent with our short and shallow recession forecast. Payroll employment fell a smaller-than-expected 20,000 last month, with minor downward revisions to February and March. Private payrolls lost 29,000 jobs, slowing from an average loss of 102,000 the prior two months. Goods-producing jobs continue to get cut, while employment in private service-providing industries rose 81,000, more than reversing the 35,000 decline during Q1.

9) The folks at Standard & Poor's are also moving away from the ledge:

The [April] employment report suggests that the recession is much milder than expected. Payrolls have now dropped for four consecutive months, which certainly suggests that this should be called a recession. However, the 20,000-job loss was much less than expected, and the drop in the unemployment rate back to 5.0% shows a stronger labor market, which is consistent with the mild rise in unemployment claims.

10) The dollar. It's rising, and that could translate into lower food and energy prices.