Obama defies pessimists as economy rises
Published 11/03/2010 | 05:00
The political consensus may be that President Barack Obama's handling of the economy has been weak.
The judgment of money in all its forms has been overwhelmingly positive, and that may be the more lasting appraisal.
One year after US stocks hit their post-financial-crisis low on March 9, 2009, the benchmark Standard & Poor's 500 Index has risen more than 68pc, and it's up more than 41pc since Obama took office.
Credit spreads have narrowed. Commodity prices have surged. Housing prices have stabilised.
"We've had a phenomenal run in asset classes across the board," said Dan Greenhaus, chief economic strategist for Miller Tabak & Co in New York. "If he was a Republican, we would hear a never-ending drumbeat of news stories about markets voting in favour of the president."
The economy has also strengthened beyond expectations at the time Obama took office.
The gross domestic product grew at 5.9pc annual pace in the fourth quarter, compared with a median forecast of 2pc in a Bloomberg survey of economists a week before Obama's January 2009 inauguration.
The median forecast for GDP growth in 2010 is 3pc, according to Bloomberg's February survey of economists, versus 2.1pc for 2010 13 months earlier.
"You have to give them -- along with the Federal Reserve -- a lot of credit," said Joseph Carson, director of economic research at AllianceBernstein LP in New York.
"A year ago, there was panic, as well as concern. And a lot of the expectations were not only that we were going to have declines in activity but they would stretch all the way to 2010, if not 2011."
Since then, monthly job losses have abated, from 779,000 during the month Obama took office to 36,000 last month.
Corporate profits have grown; among 491 companies in the S&P 500 that reported fourth-quarter earnings, profits rose 180pc from a year ago, according to Bloomberg data. Durable goods orders in January were up 9.3pc from a year earlier.
Inflation is tame and long-term interest rates remain low.
Still, the economy has become a political burden for Obama.
Voters give him little credit for its performance, while the unemployment rate remains high, at 9.7pc in February.
Public opinion of Obama's handling of the economy has gone from 59pc approval in February 2009 to 61pc disapproval this February, according to Gallup polls.
The budget deficits have stirred criticism from investment managers, economists and voters.
The Congressional Budget Office projects Obama's spending proposals will produce a record $1.5 trillion (€1.09tn) budget deficit this year and a $1.3tn deficit in 2011.
The investment returns and economic data don't impress some Obama critics.
"Coming off a level that was ridiculously low isn't much to boast about," said Dean Baker, co-director of the Washington-based Centre for Economic and Policy Research.
"What most people care about is the economy creating jobs. It's still not."
Mark Zandi, chief economist at Moody's Economy.com, said the public's opinion of the economy was likely to improve as the gains companies have made translate into more jobs and higher wages.
"Businesses are doing very well but households have yet to benefit," he said. The US may add as many as 300,000 jobs this month, the most in four years, David Greenlaw, chief fixed-income economist at Morgan Stanley in New York, said in a Bloomberg Radio interview.
Mr Zandi said the rebound was largely a result of the policies of the White House and Federal Reserve.
He cited the bank bailout, the Fed's low-interest-rate policy and support for credit markets, and the Obama administration's stimulus plan, bank stress tests and backing of mortgage companies Fannie Mae and Freddie Mac.
Phil Swagel, who was assistant Treasury secretary for economic policy in George W Bush's administration, considers himself a critic of Obama, but said the White House policies were crucial.
"They could have done a better job, but their economic policies, including the stimulus, have helped move the economy in the right direction," he said.
And John Silva, chief economist for Wells Fargo Securities said: "There's definitely legs in this recovery." (Bloomberg)