The elusive bottom

How will we know when we've hit bottom?

The short answer: We won't.

The National Bureau of Economic Research - the keepers of business cycle dating - usually doesn't call the date on recessions beginning or hitting bottom until months after we get there. That's fine for historians; not so much for our hunger for optimism.

Instead, we are left with speculation from analysts and economists, who will be back at it today with the weekly jobs report - a critical indicator of our economic health - that showed 627,000 new unemployment claims, same as last week but worse than expected.

(UPDATE: The New York-based Conference Board said moments ago that its January index of leading economic indicators rose 0.4 percent, the second straight monthly gain. Economists surveyed by Thomson Reuters expected no change in the index, which forecasts economic activity for the next three to six months based on 10 economic components. Conference Board economist Ken Goldstein says the “intensity” of the recession could begin to ease in the next few months.)

Some analysts have speculated that a bottom might be approaching soon, perhaps in the late spring or summer. Their reasoning? While we're still getting little but bad news, it hasn't been as bad as the news that preceded it. A warning, however: Economists were saying the same thing last spring, and last fall.

(Or not saying much at all. In one of the few viral economic videos out there, here's former Treasury Secretary Henry Paulson, at a November conference, attempting to answer the bottom question.)

The Fed, in the midst of somber manufacturing and housing reports yesterday, said the economy will continue to contract through 2009. But the government, too, has been regularly missing the dartboard in the past 18 months.

Among the clues the bottom has arrived - or that we landed recently - is a leveling off of jobs losses and housing indicators, as well as an increase in energy prices as Americans start to consume more.

We checked in with our economics expert, UNCC's John Connaughton, who was wise enough not to make a prediction but said he was encouraged that January retail sales were up slightly over December.

"All major categories were up compared to the December levels," he said. "Bottom line, consumers are beginning to buy, and if they can get credit they may also begin to buy autos. The ball is now in the Feds hands as the consumer has indicated they are ready to buy. The question now is can the Fed get credit to the average buyer?"

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