August 8 Update: Welcome Atlas Shrugged Shruggers, and thanks to Pamela for the great writeup (combined with discussion of last Friday’s good employment numbers), and the kind words. Pamela, in her characteristic to-the-point fashion, says: “Can you imagine if these were the numbers of a Democrat Administration? They’d be chiseling Mount Rushmore as we speak.” Indeed.
Four items of economic news that have been underplayed, apparently in the interest of finding one missing teenager (whose family has my deepest sympathies, but not my 24-7 attention), and uncovering who-knows-what in the adoption records of the two children of the Supreme Court nominee:
1. Did you know manufacturing (manu-what?) has been on a sustained tear?
Manufacturing growth accelerated in July, continuing steady and historic consistency (bold is mine):
NEW YORK (CNN/Money) – The nation’s manufacturing sector grew at a faster pace in July, according to a survey of industry executives released Monday that contained lots of good news for Wall Street expectations.
The Institute of Supply Management’s survey of executives at goods-producing companies came in at 56.6, the best reading of 2005 and up from the 53.8 reading in June. The closely watched survey, one of the first economic readings for July, had been forecast to rise to 54.5 in July.
Any reading above 50 constitutes growth in the sector, so Monday’s survey means that manufacturing has grown for 26 straight months, the longest expansion in the sector in more than 16 years, since nearly three years of uninterrupted growth ended in April 1989.
I just love it when the “best since” numbers predate the 1990s.
2. Did you realize that the stock market has been performing well recently?
The NASDAQ is just about at a 4-year high. And imagine this–Not that the dollar amounts are enough to guarantee lifetime stays at the beach, but balances in 401(k) plans are at a 5-year high (link requires registration):
The sixth edition of Fidelity’s “Building Futures” report analyzed nearly 8.6 million participants in about 10,800 corporate defined-contribution plans serviced by Fidelity at the end of 2004. In 2003, the average 401(k) balance was $55,000.
Average plan-participation rates remained steady, with 66% of eligible workers contributing in 2004 and 2003, Boston-based Fidelity, the biggest U.S. mutual fund company, said Thursday.
“We are encouraged by the key results in this year’s report,” Steve Deschenes, executive vice president at Fidelity Institutional Retirement Services Co., the nation’s largest provider of 401(k) plans, said in a statement. “The data indicate that workers continue to view their 401(k) as a popular retirement-savings vehicle, and on average are seeing higher account balances as a result.”
3. Has anyone told you that this recovery is better from an employment standpoint than the previous one?
Unless you’re a reader of Don Luskin at poorandstupid.com (which is neither) or Jim Glass at scrivener.net, there’s a good chance you don’t know that. Comparing this recovery to the previous one on five objective criteria, the score is 3.5 to 1.5 in favor of THIS recovery:
Prior recovery: 5.8%
This recovery: 5.0%
Score 1-0 for this recovery.
Long term unemployment rate (15+ weeks)
Prior: 2.25%, which is 40% more than
Long-term unemployment at this point in the prior recovery was higher even in absolute terms, 2.96 million versus 2.35 million, in spite of the work force being 17 million larger today. So the current recovery is much better on this point.
Score 2-0 for this recovery.
Average real weekly earnings from pre-recession high
In fact, during the prior recovery real average weekly wages would stay below their 1990 pre-recession high for seven years, until well into Clinton’s second term (betcha didn’t hear that during the 1990s, did you?–Ed.)
… the current recovery is up 3 to 0 right now — already we have a winner!
Labor force participation, age 20+
Prior: 67.8% (unemployment rate 5.0%)
This: 67.8% (unemployment rate 4.5%)
… we have an exact tie between the two recoveries, making the score 3.5 to 0.5.
(The fifth factor is) payroll employment. This can be quickly ceded even by fans of the current recovery — payroll indeed grew faster during the prior one.
So our final tally is 3.5 to 1.5 in favor of the labor market of today over that at the same point in the prior “Clinton recovery.”
A couple of quibbles:
- The so-called Clinton recovery started in late 1991, a year before Clinton was first elected.
- The payroll employment number, which is total people working, is in my opinion being held down by what I call the “Dr. Laura effect,” which is a conscious effort by more couples to have one stay-at-home spouse during their children’s early years. It also may be impacted by the inability of government statisticians to pick up legitimately profitable self-employed and home-based businesses.
It’s pretty obvious that the terms “jobless recovery” and “flat labor markets” should have been deep-sixed months ago.
4. Geez, I almost didn’t mention the 3.4% GDP growth in the second quarter.
Oh, and most analysts expect this figure to be revised upward in subsequent reports.
UPDATE: Thanks to prodding from the first commenter below, I should note that I am concerned about the level of risk home lenders and borrowers are taking, credit overextension in general, the possible impact of the draconian bankruptcy law that will take effect in mid-October, and the impact of current budget deficits and long-term entitlement liabilities (see the NOdometer on the home page for the figure associated with Social Security alone).
UPDATE 2: From Powerline (bold is mine):
The oddest thing about the strong economic growth that has taken place over the last several years is how stubbornly many people refuse to recognize it. Polls continue to suggest that most Americans are unaware of the economy’s excellent performance. Can that really be true? No doubt inadequate news coverage is a factor, but I can’t believe that a majority of Americans really have no idea how the economy is performing. I suspect that when asked about the economy in opinion surveys, many people focus on what they perceive to be negative at the time–budget deficits, the price of gasoline–either because that’s what’s in the news, or because they hope to influence the government by voicing dissatisfaction.
I disagree with the bolded statement. The economy’s performance is consistently being underplayed by the mainstream press; if you don’t hear it or see it, you don’t know it.
August 5 Outside the Beltway Jammer.