As 2011 closed, economic indicators were trending positive. As we now get our first look at the start of 2012, it appears that individual New Year's resolutions for a brighter 2012 are holding. Last Friday's jobs report from the Bureau of Labor Statistics indicated a jump of nearly a quarter million jobs since December, sending the unemployment rate down to 8.3 percent, a three-year low.
In recent surveys it has been clear that lower unemployment rates have come as much from people dropping out of the labor market altogether as they have from increased employment. But last week's report suggests the trend may have turned, with decent hiring of the recently unemployed.
And it is more than employment trends that look positive. The economic news includes sustained upticks in automobile sales, positive vibes in surveys of factory purchasing managers and soaring stock markets.
All of this cheery news suggests the American economy might actually be recovering from one of the deepest, longest recessions in history.
To some economists much of this may be incomprehensible. With a sharply divided government, we still don't have a coherent fiscal policy in Washington, D.C. Regulatory burdens for businesses have increased. And there has been no major new fiscal stimulus. With the only sustained policy response to the recession coming from the Federal Reserve, it is hard to identify what specific intervention is making the difference.
Indeed, the economic gurus at the Federal Reserve seem convinced that in order for the economy to recover they will need to keep interest rates at near zero for at least two more years and may need to introduce additional quantitative easing.
But free economies are extraordinarily dynamic systems. Although they necessarily respond to major changes in policy, the processes of sustained economic growth are the result of millions of private actors continuously responding to the felt needs and desires of millions of consumers.
While Washington dithers, corporations and families have put their balance sheets in order. While Congress bickers, entrepreneurs have been reconfiguring supply chains, improving manufacturing processes and refining their customer service. Although it would help enormously to have consistent pro-growth signals from Washington, Americans have nonetheless kept muddling through uncertainty about tax rates and regulation to create their own prosperity.
It's not quite yet time to start singing "Happy Days are Here Again." The clouds over the European economy keep threatening to darken our skies. And we learned last year that unexpected natural disasters in far off places can damage fragile global supply chains. But given the sclerotic response of policymakers to our long-term debt burden, the steady improvements in productivity and real growth in private employment are nothing short of miraculous — a testament to the ingenuity and hard work of the American worker and a resilient system of free enterprise.