A Spot of Good News

Business activity in the U.S. unexpectedly accelerated in November as orders climbed, signaling the economic recovery will carry through into 2010.

The Institute for Supply Management-Chicago Inc. said today its barometer rose to 56.1, the highest level since August 2008, from 54.2 the prior month. Readings above 50 signal expansion. Milwaukee and Texas also showed gains in manufacturing, other reports showed.

Rising sales, spurred in part by government incentives, and growing demand from abroad have led to a drawdown in inventories that will boost production and sustain the recovery. Mounting job losses raise the risk spending will retrench, one reason why Federal Reserve policy makers have pledged to keep borrowing costs low “for an extended period.”

“There is definitely room for production to be coming back,” said David Semmens, an economist at Standard Chartered Bank in New York, who forecast the index would rise. “There will be some export-led growth.”

Stocks trimmed earlier losses after the stronger-than- expected report. The Standard & Poor’s 500 Index rose 0.1 percent to 1,093.07 at 11:00 a.m. in New York. [Bloomberg]

Elsewhere, Jacob Weisberg at Slate strengthens the case that the conventional wisdom - as unwise as ever - that Obama's first year is a wash has got things backwards, as the media rating of presidents goes.

...The bill he signs may be flawed in any number of ways—weak on cost control, too tied to the employer-based system, and inadequate in terms of consumer choice. But given the vastness of the enterprise and the political obstacles, passing an imperfect behemoth and improving it later is probably the only way to succeed where his predecessors failed...

For the federal government to take responsibility for health coverage will be a transformation of the American social contract and the single biggest change in government's role since the New Deal. If Obama governs for four or eight years and accomplishes nothing else, he may be judged the most consequential domestic president since LBJ. He will also undermine the view that Ronald Reagan permanently reversed a 50-year tide of American liberalism.

Obama's claim to a fertile first year doesn't rest on health care alone. There's mounting evidence that the $787 billion economic stimulus he signed in February—combined with the bank bailout package—prevented an economic depression. Should the stimulus have been larger? Should it have been more weighted to short-term spending, as opposed to long-term tax cuts? Would a second round be a good idea? Pundits and policymakers will argue these questions for years to come. But few mainstream economists seriously dispute that Obama's decisive action prevented a much deeper downturn and restored economic growth in the third quarter. The New York Times recently quoted Mark Zandi, who was one of candidate John McCain's economic advisers, on this point: "The stimulus is doing what it was supposed to do—it is contributing to ending the recession," he said. "In my view, without the stimulus, G.D.P would still be negative and unemployment would be firmly over 11 percent."