EVEN people who don’t normally care much for football tune in to the Super Bowl to watch the best commercials Madison Avenue can dream up. The most talked about this year was Chrysler’s gritty tribute to the economic revival of America and Detroit. More short film than commercial, it ends with the actor Clint Eastwood huskily declaring that Our second half is about to begin.
The muscular patriotism brought lumps to the throats of sentimental viewers; the more cynically minded called it a re-election ad for Barack Obama, whose administration saved Chrysler from oblivion with a bail-out in 2009. A better explanation may simply be timing: it coincides with the best evidence in months that America’s economy, led by manufacturing, really is on the mend.
Five days before its ad aired, Chrysler, now part of Italy’s Fiat, reported its best January sales since 2008, up 44% from a year earlier. The next day it announced it would hire 1,800 people at a plant in Belvidere, Illinois, to build its new Dodge Dart. The good news is hardly confined to Chrysler. The auto industry as a whole sold 1.2m vehicles in January, many more than expected, and a 4% increase from December.
Then on February 3rd the government reported that non-farm employment jumped 243,000 in January, or 0.2%, from December, the best in nine months, led by manufacturers, who boosted payrolls by 50,000. Government statisticians also revised data for the previous year and found that at year-end there were 266,000 more jobs than had previously been thought.
The unemployment rate, which has repeatedly surprised economists with the speed of its descent, did so again: it fell to 8.3%, a three-year low, from 8.5%. Its decline from a peak of 10% in October 2009 has been helped by unusually stagnant growth in the labour force. When fewer people want to work, fewer are counted as unemployed. That, however, was not the case in January when the labour force grew by 250,000. The unemployment rate dropped anyway because the number of employed people leapt by 631,000.
The report was greeted with relief bordering on joy by the stockmarket and, no doubt, by Mr Obama’s campaign team. But their happiness should be tempered by the reflection that in both 2010 and 2011, job growth started out briskly only to fizzle out again.
Will it do so again this year, possibly dooming Mr Obama’s re-election? Two factors explain the economy’s previous false starts. First, banks, households and governments are paring their debts. That deleveraging has further to go, but seems to have slowed as rock-bottom interest rates coax consumers to indulge some of their pent-up demand for homes and cars. State and local government lay-offs have also slowed. Meanwhile firms that were able to meet increased demand by boosting the productivity of their existing workforce no longer can. Productivity growth, which topped 6% in the wake of the recession, slowed to just 0.5% in the fourth quarter (from a year earlier). In December employers reported total job vacancies of 3.4m, close to its highest since 2008.
The second stumbling block has been bad luck. In both 2010 and 2011 Europe’s sovereign debt crisis flared up, damaging confidence in America. Last year the Arab spring sent petrol prices soaring, pinching incomes, while Japan’s earthquake and tsunami disrupted supply chains.
The threat of more such setbacks still hangs over the economy. Europe’s crisis has not been solved. The intensifying confrontation between Iran and the west has driven petrol prices up 25 cents per gallon since mid-December. Federal austerity remains a threat: Congress is once again locked in confrontation over a payroll-tax break that expires at the end of this month and a raft of other tax increases and spending cuts will kick in next year unless it intervenes. In the economy, as in football, there is no guarantee that the second half will be easier than the first.