Signs That Things Are Getting Better

Here's what to watch for to tell whether the stimulus package is actually working, and when the economy might start to mend.

• An improvement in the unemployment rate. Of all the economic indicators, this is probably the single most important. But you might want to avert your eyes for awhile.
• More stable home prices. The realestate boom and bust is what torpedoed the economy in the first place, and the economy won't start to recover until the housing bubble fully deflates.
• A consumer confidence rebound. Since consumer confidence closely tracks the job market, the dismal numbers of the last few months probably won't improve by much until late in 2009, or 2010. Homeowners have lost more than $3 trillion worth of value in their homes over the last three years, and investors have seen their stock portfolios shredded. So even people who feel secure in their jobs are dour.
• A less volatile stock market. Every investor hopes that beleaguered stocks will come roaring back in 2009 and regain some of the ground lost since the peak in 2007 - when the S&P 500 stock index was nearly 50 percent higher than it is today. But a better indicator of economic health would be a steady recovery - without the manic swings that seem to come from every hint of undisclosed trouble at some big bank or rumor of new government intervention.
• Economic growth turns positive. By economic standards, the current downturn has already lasted longer than the typical post-World War II recession.