Ready for some good news about the American economy? American consumers have good reason for optimism. Retail sales made their biggest single month jump in February, increasing by 1.1% over January. This fit the prediction of economists for the month, but the cherry on top is that the revised data for December and January came in higher than originally thought. All of this points to consumers who are more willing to part with their hard earned cash.

SEE: Consumer Confidence: A Killer Statistic

Or does it? A big chunk of the spending was on gasoline. With gas prices increasing sharply over the last month or so, it's hard to say at this stage how much of the increase in consumer spending is just people paying to go to and from work every day. With gas prices up 3.3% for the month of February, the increased spending on gas could quite well be significant.

Simply Recovering Vs. Recovering Strongly
But it's clear that increased gas prices probably do not account for all of the spending. Recent job figures don't exactly have economists dancing in the streets, but they do show some significant improvements. All told, over 200,000 jobs were added during the month of February. The bad news is that the unemployment rate remained the same and was tempered by the news that many people who had previously given up were looking for jobs again. Justin Wolfers, a visiting economics professor at Princeton, told the Washington Post that the debate is between those who think the economy is recovering and those who think it's recovering strongly.

Stock Market Rally
There's yet another indication that the economy is in recovery: The Federal Reserve says that the country's biggest banks are healthy again. This is perhaps the reason for the recent stock market rally. Three major indexes: the Dow Jones Industrial Average, Nasdaq Composite and the S&P 500 all increased just under 2%, achieving heights not seen since before the current financial crisis.

Job Growth
Still, any optimism should be cautious. In 2011, America showed job growth during the first quarter. This did not last even into the second quarter of the year, however. Although, this year is already different in many important respects. Healthcare, hospitality and, perhaps most importantly, manufacturing all posted gains. The bleeding has stopped in the public sector. Furthermore, February is the 17th consecutive month that jobs have been added to the economy. While 13 million Americans remain unemployed, everything indicates that the economy is on the upswing. The hope is that any recovery can be sustained.

Gas Prices
The increase in gas prices hasn't been as destructive or growth retarding as one might immediately think. Auto manufacturers reported a 1.6% increase in the sale of new cars, with discretionary spending up 1.8%. Department stores who have taken huge hits during the recession posted gains of 1.5%, healthy and respectable by any measure.

The Bottom Line
Indeed, consumer spending and a stronger jobs market are the two things that have been missing from the economic recovery. Much of the prerecession economy was driven by two things: construction and consumer spending in the U.S. If China is the world's factory, then America is the world's department store. With more Americans spending money and working, the prospect of recovery looms on the horizon in a far more concrete way than before. Add a robust stock market into the mix and America, and the world, have reason to put a little extra spring in their step.

Nicholas Pell is a freelance writer based in Hollywood, CA. He's pleased as punch to see his friends working again.

Related Articles
  1. Chart Advisor

    ChartAdvisor for February 5, 2016

    Weekly technical summary of the major U.S. indexes.
  2. Economics

    Explaining Economic Indicators

    Investors use economic indicators to gauge investment opportunities and judge the overall health of an economy.
  3. Chart Advisor

    ChartAdvisor for January 29, 2016

    A weekly technical summary of the major U.S. indexes.
  4. Economics

    3 Economic Challenges France Faces in 2016

    Learn about the three most significant economic challenges facing France in 2016. How will France implement reforms to improve its GDP and reduce unemployment?
  5. Chart Advisor

    ChartAdvisor for January, 22 2016

    A weekly technical summary of the major U.S. indexes.
  6. Economics

    Davos 2016, Day 1: No Crash, But Robots Are Taking Over

    Lagarde says chill out, Biden wants to rescue the middle class.
  7. Chart Advisor

    ChartAdvisor for January, 15 2016

    A weekly technical summary of the major U.S. indexes.
  8. Economics

    4 Economic Challenges China Faces in 2016

    Learn about the four economic challenges China faces in 2016 and what China's leaders plan on doing to tackle a slowing economy and high corporate debt.
  9. Stock Analysis

    The Best US Equity Sector Since Market Low in March 2009

    Learn about the best U.S. equity sectors since market low in March 2009 and understand how they have achieved the best returns and predictions for the future.
  10. Investing Basics

    The Pros and Cons of Indexes

    Learn about the advantages and disadvantages of stock indexes and passive index funds. Discover how there is an opportunity cost to using index funds.
  1. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  2. Why is the employment figure important to a "dove"

    The employment figure is important to doves, because they are primarily concerned with the health of the labor market. Doves ... Read Full Answer >>
  3. How does the U.S. Bureau of Labor Statistics calculate the unemployment rate published ...

    The unemployment rate is one of the most closely followed indicators, used by businesses, investors and private citizens ... Read Full Answer >>
  4. What are some of the key shortcomings of how the U.S. unemployment rate is determined ...

    Each month, the Bureau of Labor Statistics (BLS), a division of the U.S. Department of Labor, announces the unemployment ... Read Full Answer >>
  5. What are the major laws (acts) regulating financial institutions that were created ...

    Presidents George W. Bush and Barack Obama, in conjunction with Congress, signed into law several major legislative responses ... Read Full Answer >>
  6. What austerity measures can a country implement to curtail government spending?

    Broadly speaking, there are three types of austerity measures. The first is focused on revenue generation (higher taxes), ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center