The American economy flipped from recession to recovery over the summer, a bit of sunshine news just before the weekend that ends daylight saving time.
But even President Obama, who claims his stimulus spending has created or saved 650,000 jobs so far, isn't celebrating quite yet.
The news of a 3.5 percent rise in economic growth was met with plenty of "Is this a trick or a treat?" comments by market watchers. And Mr. Obama himself warned that the US economy has "a long way to go" to being fully restored.
Indeed, coming back from the longest economic contraction since World War II will require a careful assessment of what has worked so far to avoid making policy mistakes. Economists are still debating what ended the Great Depression, which was triggered 80 years ago this month by the 1929 stock market crash.
With midterm elections for Congress a year away, politicians will be focused on job creation. More than 4 million jobs have been lost so far this year, a source of great suffering for many Americans. And the unemployment rate, now double what it was two years ago and at a 26-year high, could rise above 10 percent soon and stay high a while even as the economy itself recovers.
The job losses would have been higher if not for the $787 billion stimulus plan, the government's "cash for clunkers" boost in new-car sales, and the $8,000 tax credit for first-time home buyers.
But such spending, which largely takes money out of the economy to spend it elsewhere, is temporary.
Real job creation comes from the more fundamental levers of government, such as actions by the Federal Reserve and US Treasury to stabilize banks and Wall Street and to keep interest rates low. Fresh capital invested in innovative, globally competitive enterprises is what really creates the best high-paying, long-lasting jobs.
While the Obama administration claims some $150 billion of $339 billion in stimulus money spent through Sept. 30 has created and saved jobs – mainly in state and local governments – this accounting is incomplete. Left unassessed is the impact of the Recovery Act's $288 billion in tax cuts, and how that incentive may be spurring business to restock shelves and hire innovative workers. (The average rate of productivity for American workers has jumped during this recession.)
Investments by venture capitalists so far this year are still about half of what they were compared with a year ago. And layoffs among the most important workers spurring innovation – scientists and engineers – has been greater than for most other types of workers.
While the stimulus package does provide incentives for innovation in energy and also boosts worker retraining for high-tech jobs, the money isn't coming quickly enough. Almost two-thirds of the impetus behind the rise in the gross domestic product in the third quarter of 2009 was because of higher consumer spending.
That was unusually high. And in fact, consumer spending plunged in September, in large part because of the end of the cash-for-clunkers program.
Instead, private investment needs to become a higher portion of what drives economic growth. Creating that investor confidence won't be easy, but it's essential.
A nice uptick in the economy over the summer is welcomed news. Now let's make sure that it lasts by putting more capital to work in order to get Americans back to work.