Ten Reasons For Some Economic Optimism

Dwelling too much on the doldrums violates the holiday spirit. Yes, the economy is in bad shape, very likely entering or already in a painful recession. But it's not all bad. No, really.

At the pump, oil price deflation is also known as cheaper gas. For those who have been priced out of the housing market for a decade, the imploding market offers hope they'll someday be able to buy.

Still, after decades of a debt-fueled binge, the American consumer is fearful and grumpy. The Conference Board estimates that the average household is going to spend about 10% less for Christmas gifts this year, down to $418 from $471 in 2007. That means consumption, the biggest part of the country's gross domestic product, is likely to fall precipitously in the fourth quarter. But then what?

"You have to ask the question: How long will this total lack of confidence last?" says Joel Naroff, the chief economist for TD Bank. "Can consumers remain irrationally despondent for an extended period of time?"

Naroff, picked in October by Bloomberg News as the year's top economic forecaster, has been looking at consumer confidence since it started to slip in the summer, and he thinks it's too pessimistic and will snap back. It's the same intuition that had Naroff worried about how badly misaligned the housing markets were when he called the downturn before many others.

History suggests Americans just don't stay depressed for long, he says. Even with economists talking of unemployment rising to 8% or 9% from the current level of 6.5%, most people and businesses will muddle through. "You go out eight months from now. You're in May, June, July. People discover they still have their jobs. Businesses have realized that while conditions aren't great, they're not going to fold," says Naroff, "They ask, 'Why am I behaving as if everything is going to collapse tomorrow?' And they come to the conclusion it's not, and that's when they start spending."