2014 Might Turn Out to be a Fairly Good Year for the Economy

Analysts are starting to get optimistic about the economy:

Record exports and the smallest trade deficit in four years. Healthier consumer spending, including the strongest annual increase in automobile sales since 2007, spurred by a booming stock market and an improving housing sector. And a slow but steady pickup in job creation that has pushed unemployment to its lowest level since 2008.

….Just a few weeks ago, there were fears that 2013 would end on a sour note in terms of economic growth….But better-than-expected trade data on Tuesday, as well as an increase in consumer activity in October and November, prompted many economists to revise their estimates of growth in the fourth quarter sharply higher this week.

Dean Maki, chief United States economist at Barclays, now says he believes the economy expanded at an annualized pace of 3 percent in October, November and December, double his previous estimate….Mr. Maki attributes more than half of the gain in consumer spending to the surging stock market in 2013 and the steady recovery in real estate prices, the so-called wealth effect that has left shoppers feeling more confident.

Without getting too rosy-minded about things, I’m modestly optimistic too. Why? Because the proximate cause of our long, grinding downturn was too much debt, and in the second half of 2013 it started to look as if household deleveraging had finally run its course. With consumer debt now below the level of the mid-90s, there’s a decent chance that spending will pick up and the economy will come along with it. No one should expect sudden boom times, and long-term unemployment remains a national catastrophe, but 2014 could turn out to be a fairly decent year. We’ll get our first sign on Friday morning, when the Labor Department reports December jobs growth. If it’s over 200,000 again, that will be a good sign. If it’s closer to 250,000, that will be a great sign.