Here’s the good news…

Lots of talk about economic “Escape Velocity” these days, and whether or not we’ll actually see it in 2014. We’ve had four annual false starts for escape velocity since 2010 – every spring we look like we’re ready to rock, every summer the estimates are ratcheted back down again.

But something in the atmosphere has gripped Corporate America (and its economists) this year that may actually offer the real economy a bit of traction. Call it Animal Spirits, call it a burning desire to produce earnings growth (and thus hit compensation targets), call it whatever you’d like – it could be just what the doctor ordered.

The quarterly survey of the National Association for Business Economics or (NABE) seems to suggest that increased hiring, wages and spending are all imminent amongst the 72 participants – all of them economic forecasters for large private enterprises. According to the Wall Street Journal, “43% of corporate economists expect hiring within their firm or industry to increase during the next six months. That was the most optimistic forecast since July 2011. The latest poll found that only 8% of economists expect businesses to cut payrolls over the next two quarters.”

With more color on the report and what it might mean, here’s Peter Boockvar, Managing Director and Chief Market Analyst at The Lindsey Group:

A further hint of a Spring economic rebound was seen in the NABE quarterly survey of 72 US members “on business conditions in their firms or industries, and reflects Q1 ’14 results and the near term outlook.” The NABE said after a tough winter, “survey participants continue to report strong expectations for increased growth over the course of 2014.” Industry Demand fell to 44 from 53 but that is still up from 30 in the quarter prior. Positively, Capital Spending rose to 32 from 20, the best since early ’12 and hiring plans for the next 6 months also improved. Of note too, higher wages and salaries were at the highest level also since early ’12 with the caveat that the NABE said “survey respondents note that they expect wage growth to remain fairly subdued, rising between zero and 3% over the next 3 years.” Income growth is the key missing piece of ‘escape velocity’, outside of cap ex, in this recovery.

Good to hear, but…

We’ve been teased similarly before. During the six months from that afore-referenced July 2011 peak in hiring plans, the economic outlook fell apart and employment gains actually slowed instead of rising. The bulls would point to the European mess that summer followed by the Treasury vs Congress showdown as having thrown Escape Velocity off course. The pragmatists would say that there’s always going to be a convenient excuse at the ready.

And so while it’s nice to see optimism and hiring plans – don’t fall out of your chair if they fail to materialize once again.

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