Mission Accomplished: Summers Ends Economy's Free Fall

Googley Economic Indicators

Lawrence Summers addressed the Peterson Institute for International Economics today, with upbeat comments about the economy. While it had been in "free fall" at the start of the year, he said, with "no apparent limit on how much worse things could get", optimistic statistics were now starting to pour in.

We'll take Summers word that there are positive signs -- other economists agree. Summers lost us though, when he said that the number of people searching on Google for the term "economic depression" has "returned to normal levels". Is this the best statistic he could come up with? I think you could present an alternative theory which said that at the beginning of the year people were curious about what "depression" would feel like, so they Googled it. Now, they know, they don't really need to Google it.

Waking Up From Free Fall: A Recurring Dream

We also note that you would see the same optimistic trend by searching for the term "free fall" (as in economic, not parachuting). Four months ago the expression littered the papers. Now, not so much, perhaps because Summers has eased up on his "free-fall" rhetoric. Summers has been saying the free-fall is over for months:

  • April 3, 2009 (Wall Street Journal) Lawrence Summers talked to the Wall Street Journal about the economy, saying that: "this sense of free fall will give way before too long".

  • April 9, 2009 (Reuters) Lawrence Summers told the Economic Club of Washington: "I think the sense of a ball falling off the table -- which is what the economy has felt like since the middle of last fall -- I think we can be reasonably confident that that's going to end within the next few months and you will no longer have that sense of free fall".

  • April 19, 2009 (Fox News Sunday) Summers told viewers: "You have a sense of a more mixed picture in terms of consumer spending, and "not the kind of free fall that you saw, in part, because the stimulus that the provided in the recovery and reinvestment act is coming into people's paychecks, and that's putting a little more energy into the--into the consumer."

  • April 26, 2009 (Washington Times) Lawrence Summers: "But I think that sense of "unremitting free fall that we had a month or two ago is not present today," he said. "That's something we can take some encouragement from."

  • May 16, 2009 (Bloomberg) -- The U.S. "economy is no longer in free fall" Lawrence Summers, director of the White House National Economic Council, said today in a pre-recorded video shown at a forum in Shanghai.

  • June 12, 2009 (Associated Press) In a speech to the Council on Foreign Relations in New York, Summers said the government had acted as necessary to avoid dire outcomes: "While we still have a long way to go, the sense of free-fall that surrounded any reading of economic statistics a few months ago is no longer present"

Of course some economists argued vehemently that the economy never was in "free fall", but that was back in October, 2008. Summers has long been bullish on the effects the economic stimulus package had on halting the "free fall", although economists point out that the stimulus money is only just now starting to filter in now. Summers didn't dwell too much on the abysmal unemployment rate, a less positive economic indicator, in his speech today. Nevertheless, we think Summer's is pulling his weight trying to bolster consumer confidence.

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