I find the debate about whether or not we’re seeing “green shoots” to be a bit confused. Moreover, I don’t believe I can see the future. What I can see is the present, where markets react to any sign of good economic news with a big jump in oil prices. And the news in question is of the “things aren’t getting bad quite as quickly as we feared” genre of good news. What if six months ago, the economy is actually growing? Not growing rapidly. But just growing. Like, the number is above zero rather than below it.
Well it seems to me that we’ll be right back where we were in the summer of 2008 where sky-high gas prices were clobbering everything. And we haven’t really done anything over the past year to leave ourselves better-prepared for that situation.
Meanwhile, over the past six months the rising unemployment rate and falling asset values have been partially offset by the fact that thanks to energy price declines, real incomes for the employed majority have actually been rising. A spike in oil prices will put a stop to that and further hammer consumption. And the ensuing rise in inflation, though it’ll be non-core inflation, will probably make the Fed queasy about expansionary monetary policy.
Which is to say that if the recession ends, then it seems likely that we’ll slip right back into a new recession. I wish that weren’t the case, and that everyone would just react to an oil price spike by biking to work, but realistically we don’t seem to have made nearly the scale of adjustments that would be necessary to let the country shrug off a return to oil that costs over $4 a gallon.
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