Diane Swonk, Chief Economist
Feb. 25, 2010 – 8:00 a.m. CT
Recovery Lost Momentum at Start of Year
Durable goods surged 3% in January. All of that gain, however, could be attributed to a pickup in orders for transportation equipment, which is not exactly the most resilient of sectors. Indeed, aircraft and vehicle orders are likely to fall again in February, especially in light of Toyota's recent recalls.
Separately, unemployment claims jumped to 496,000 in the most recent week, which is closer to recession levels than recovery levels. Harsh winter storms were a factor, as they forced many temporary and hourly workers off the payrolls and into the ranks of the unemployed. Many of those workers will return to work in March. The fact that these snowstorms – as bad as they were – could have such an impact is more testimony to the fragility of the recovery.
The Bottom Line: The recovery is still on thin ice and lost momentum in the first quarter. A double-dip recession remains a small but very real risk.
In a rare bright spot, moderates in the Senate appear to be working together to get financial reform legislation passed. Senator Chris Dodd (D-Connecticut), in particular, has been reaching across the aisle to get a deal done. He desperately wants some kind of positive legacy now that he has decided not to run again in November. This push for moderation and bipartisanship is unique in an election year and, not surprisingly, is being driven by people who are NOT up for re-election in December. Now, if we could just send a similar message to those who ARE running, we might be able to move forward instead. I am hopeful – but not delusional – that such an outcome is possible.
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