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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

May 21, 2009 at 10:00 AM

Signs of bottoming out don’t mean a recovery is at hand

Top of the News: More evidence of a sucker’s rally comes from Nouriel Roubini’s RGE Monitor, which looks at the big rise in commodity prices since the beginning of 2009, a bet that the recession will be V-shaped and we’re on the upbound leg.

“However, these ‘green shoots’ might still be a signal of the stabilization of economic activity at low levels, rather than a return to trend growth. Even if GDP growth around the world has bottomed, growth may continue to be negative or sluggish until 2011,” the RGE analysts write.

Behind the commodity rise has been technical factors such as stockpiling, rather than fundamentals, such as a rebound in growth.

Washington state take note: Agricultural commodities have been trading in a more realistic range. Grains have risen only 1 percent from May 2008.

As to today’s report on new jobless claims, the slight drop will be meaningless unless it continues for some weeks. More on point is that nearly 7 million are unemployed and seeking benefits, with millions more discouraged and underemployed (part-timers who want but can’t find fulltime work) workers uncounted.

At best, we’re talking at best about stabilization at lower levels, with no sense of when and how hiring will resume. The labor market will continue to be a focal point of real pain, and the hope for recovery, whether the banksters on Wall Street and in Charlotte get it or not.

The Back Story: Travel across Europe with its wonderful rail service and you’d never know that America once had the best passenger train system in the world. We destroyed it, thinking a 1965 transportation paradigm would last forever.

Now we’re trying to rebuild it, including President Obama’s support for high-speed rail. Establishing reliable, frequent regular service in populous regions is even more doable and likely to succeed, as has been shown with the Cascades service in the Northwest.

The benefits of rail include better productivity by helping workers avoid congestion, energy savings, a smaller environmental footprint and employment of rail and construction workers. Advancing the industries to build better trains could provide a dramatic boost, according to a piece in the Infrastructurist. It argues that the U.S. has been a laggard in this global industry — and creating companies here could employ more than the Big Three.

Today’s Econ Haiku:

A new Xerox boss

Faces a daunting challenge:

Copy Anne’s success

Comments | More in Transportation

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