Why the economy is looking up

Several reasons, actually: Much-improved prospects for the holiday shopping season (which follows a much-improved back-to-school shopping season), pent-up consumer demand after many months of U.S. households paying off their debts, fewer Americans applying for jobless benefits, recent stock market gains, new surveys this month showing a pickup in hiring, better-than-expected increases in personal income, and record-setting corporate profits during the summer. More on this last point from Real Time Economics:

The profit upturn "will almost certainly point to a stronger pace of hiring in the quarters ahead, because every strong profits recovery in the past has given way to a noticeable pickup in hiring," says Joseph LaVorgna, chief U.S. economist at Deutsche Bank. Traditionally, a rebound in profits give businesses the cash and confidence to initiate new capital projects and then to add more workers. That pattern seems to be happening a bit faster this time around than in the recent past.

So what gives? Well, the shorthand explanation is that the economy has finally healed up enough for people to start noticing - consumers, business owners, maybe even bankers. The pace remains slow - and somewhat uneven - but it is definitely happening. Some economists might describe this as an organic recovery - the idea that no matter how bad things get during a recession, and no matter how much politicians try to muck things up, the economy has remarkable recuperative powers. Now, there are several flies in the ointment, among them a still-struggling housing market and chronically high unemployment (mostly centered on 40-and-above workers who for various reasons cannot find a job). Those problems will not go away anytime soon. I mean, we're talking years. There also are imponderables, such as the European debt crisis (not a huge deal for the American economy so far, but you never know), and the massive amounts of government debt and pension obligations that must somehow get squared. Plus, whatever the North Koreans and the terrorists have up their sleeves. The truth is there's a lot that can derail what gains have been made these last few months. But for now, the pace is definitely picking up. On this Thanksgiving Eve anyway, it's not your imagination.