What's going on is:
1) A moderate consumer rebound fueled by deadbeats getting free rent
2) A market bubble fueled by zero interest rates
3) GDP growth driven by horrific deficit spending
On the first point, I wrote last May:
[H]ow much of a stimulative effect is there on the economy when 9% of mortgage debtors suddenly save the $1000 - $2000 per month they used to be wasting on a mortgage? Honey, I stopped paying the mortgage! Let's go to Disney World!That view is making headlines now, including from CNBC's Diana Olick and Gluskin Sheff's David Rosenberg. I'd add that perpetually extended unemployment benefits, 40 million Americans on food stamps, and "tax credits" for people who don't pay taxes contribute as well.
On the second point, the Fed has proven that it can create asset bubbles better than it can create consumer inflation. The Fed is throwing around so much free money that all risky assets rise (stocks, junk bonds, oil, gold, real estate, etc.). It's not flowing through to consumer inflation much yet because demand is still weak. The Fed is enriching the already rich (asset owners) while doing nothing for the unemployed and underemployed. Asset bubbles don't necessarily create mass employment. See Robert Reich re: there ain't no jobs. Also see Mish on big business hiring:
Here is a snapshot of IBM's US headcount:
2010 98,000 estimate
These are all good paying jobs that can support a family and pay taxes.
Today, 75% of the total headcount is overseas. The overseas revenue is 65%. The company reported record profits last year. IBM decided to stop reporting their US headcount this year.
and small business hiring.
On the third point, yes, GDP is rising. What else would you expect when the government is running deficits of 10% of GDP?
GDP = C + I + G + X
Meaning GDP = Consumption + business Investment + Government spending + net eXports
Notice that government spending goes 100% directly into GDP. So if the government hires 1,000 bureaucrats at $100,000 a year to sit around and dream up new ways to torment taxpayers, that's $100 million directly into GDP. Which is exactly what Barack Obama has done, only it isn't $100 million, it's hundreds of billions. Now if you run deficits of 10% of GDP, or more than a trillion dollars a year, all that money goes directly to GDP no matter how wastefully it is spent. Current GDP growth is not a sign of recovery, it's the direct mathematical result of spending our children into debt.
We'll have a real economic recovery when businesses, not government, start hiring. We'll have a real economic recovery when we get GDP growth without running Greece-sized deficits. I hope that recovery comes before Obama has spent us into an inescapable black hole of debt.