Posted by Lexington Green on September 16th, 2003 (All posts by Lexington Green)
Sylvain’s post, immediately preceding this one, about a recent Don Luskin article, seems to reflect a growing consensus. The economy is in better shape than our little friends in the mainstream media want us to know about.
Jonathan sent me this article, The Bush Boom, by Brian S. Wesbury, which has all kinds of delightful news:
… the third and fourth quarters are on track for what could be 6.0% real GDP growth. Retail sales show a 12.1% annualized increase in the June-August period. Housing starts are at a 17-year high, new and existing home sales have set new records this year, and disposable personal income is up an annualized 9.4% in the past three months. Productivity growth in the non-farm business sector expanded at an astounding 6.8% in the second quarter, while spending on computers and peripheral equipment jumped 57.5% at an annualized rate.
The worm in the apple, at least for Bush’s political fortunes, is the permanent disappearance of manufacturing jobs. “What the economy is experiencing today is a significant structural shift, not just a cyclical one. While manufacturing output has held steady as a share of GDP, manufacturing employment has fallen from 25% of all jobs in 1970 to 11% today.” Count on the media to focus on these manufacturing jobs going away forever, forever, forever … .
Wesbury also notes “a big divergence between the two surveys of employment run by the Bureau of Labor Statistics.” The “Establishment Survey“ shows non-farm payroll jobs falling by “93,000 in August, creating a total job loss of 437,000 for the first eight months of 2003.” This is the source of the media wailing and gnashing of teeth about “jobless growth”. But it is simply not an accurate picture. The BLS’s “Household Survey” shows something very different — “that 1.186 million new jobs have been created this year.” What gives? “[S]ole proprietorships and other small companies are starting up at a faster rate today than they did even in the go-go ’90s. They don’t show up on the Establishment Surveys’ radar because they’re too small and too new. However, the Household Survey catches these jobs by asking workers directly.” If you are in the news media, you pick the unfavorable number for the sitting GOP president, and repeat it over and over until it becomes accepted as “truth”.
Wesbury’s conclusion: “virtually every sector of the economy is booming today, especially high-tech. Weak job growth is an anomaly and cannot last …there should be no doubt that this economy is gathering momentum.”
A similar story is told in this article, entitled 7 reasons the job market is about to take off. Here are the seven reasons:
1. Tax cuts are reinforcing rising consumer income.
2. Government spending is rising rapidly on defense and homeland security.
3. Interest rates are still very low, so credit’s cheap.
4. Corporate investment spending is beginning to recover.
5. The stock market is rebounding, restoring wealth and confidence.
6. Inventories are unusually low, so factories need to increase production just to meet demand.
7. And after several adverse shocks — corporate scandals, Wall Street scandals, foreign wars — it seems the worst is over.
If you want the analysis, read it all.