In the past few months, despite some abatement, payrolls continued to decline and the unemployment rate jumped to 5.8 percent, putting a dent in labor income. Moreover, some of the resilience in household spending last quarter was likely due to temporary factors: the zero percent financing available from automakers, the steep discounts at retailers, and warm weather. Additionally, corporate profits remain quite soft.
Economists have always had difficulty identifying turning points, so I will not try to predict this one. However, I do think stimulative policies in conjunction with the normal equilibrating dynamics of the economy are likely to promote a rebound before too long. The contours of the upturn are uncertain.