Countdown to recovery

Having established that nobody knows nothing, there are at least certain guideposts that can be useful in monitoring when and how the economic turnaround takes place. For what they're worth:

(1) Best indicator is home sales – especially the percentage of them that come from foreclosures. Right now, they represent at least one third of homes sold in L.A. County (70 percent in Riverside). Obviously, that’s not a healthy housing market. Fewer foreclosed sales will be an encouraging sign.

(2) Also, look for a bottoming out in home prices. This might not come until the end of the year – perhaps not until 2010. And it might not happen before prices fall a lot further (some estimates say another 25 percent in 2009). Warning: Prices are not likely to take off once the bottom is reached. Actually, it could take many years to get us back to where we had been.

(3) None of that will be possible unless banks are willing to lend – not just to potential homeowners but also to folks wanting to buy a new car or developers applying for a construction loan. To some extent the logjam is starting to loosen, and it will probably open up even more by the second quarter of 2009.

(4) As for employment, it might be a while before businesses feel comfortable about hiring again. As of November, the jobless rate in L.A. County was 8.9 percent and it could easily top 10 or even 11 percent. The wild card in all this is the economic stimulus plan out of Washington. If that happens quickly (and so far it hasn’t), the job market could improve sooner than expected.

(5) If more folks find work, then more folks will be spending – and that's a huge deal for many of the retailers that are struggling just to survive. Lots of them, however, will not make it. The new year will be marked by tens of thousands of store closures.

(6) One way of measuring a pickup will be traffic at the ports of Los Angeles and Long Beach. Shipping activity has been slow all year – and it figures given the sluggish levels of consumer spending. When port traffic starts increasing, it says that the Wal-Marts and the Macy’s are more encouraged that shoppers are ready to spend.

(7) Another good sign will be higher gas prices. That may seem like a bad sign, but when gas prices keep falling – as they have for the last few months – it means demand is still sluggish. Higher oil and gas prices will indicate greater demand and that will point to an economy that’s growing again.

(8) Maybe the best measurement is your own comfort level. Most of us just wanted to crawl under a rock in October and November, but at some point we’ll start hearing about friends being hired or somebody getting a loan to buy a house or a new car. Success breeds confidence. That’ll be the start of the turnaround.