The Boom Goes On

From IBD:
Posted 5/5/2006

Economy: Gee, how bad can it get? "New Hiring Slows." "Wages Raise Inflation Fears." "Companies Aren't Hiring." "Slowdown Ahead." Beyond the headlines, the Dow ekes out a 139-point gain to another six-year high.

No wonder consumer confidence lags. Another 138,000 people find jobs, bringing the total since September 2003 to 5.27 million; the unemployment rate remains at a 4 1/2 year low; wages are rising at a yearly rate of 3.8%, the fast growth in five years, and the first wire service dispatch (from The Associated Press) reads as follows:

"New hiring slowed significantly in April as employers added just 138,000 people to their payrolls, the slowest pace of job growth in six months. The latest snapshot of labor market activity also showed a sharp jump in workers' wages, which is sure to raise inflation fears."

The story, released shortly after the latest job numbers were released Friday morning, went on to note that:
"Payroll performance in April was weaker than economists were expecting."

"This suggests that companies are not aggressively hiring."

"Companies are showing some caution with expectation that rising energy prices, higher interest rates and a slowing housing market may temper overall economic activity."

"Analysts expect the economy to log slower growth in the April-to-June quarter."

The AP is by no means alone in its relentlessly gloomy take on the economy. We chose them because they set the tone for many local papers.

Here's the reality. It is true, 138,000 new jobs was below expectations. But it's still not bad. It's more than twice the 59,632 monthly average job gain since the start of 2000. And it extends a string of growth to 32 months in a row.

Other recent data show that:

**Unit labor costs — what it actually costs to employ someone — were up just 1.4% year over year in the first quarter, thanks to continued gains in productivity. By the way, that's way below the 20-year average gain of 1.92%.

**Durable goods orders in March rose 18.3% from a year earlier, the second largest gain in over a decade.
Retail sales on a same-store basis grew 6.6% in April, the best gain in over two years.

**Home resales continue to rise, defying repeated predictions of a bust. Meanwhile, new-home sales surged 13.8% in March.

**Finally, GDP grew 4.8% in the first quarter and has averaged 3.9% since 2003's tax cuts — reversing the abysmal 1.7% average growth that prevailed after the 2000 stock market crash.

They used to call numbers like this a boom.

Even some "bad" news in the jobs report wasn't really. Take that nasty 3.8% rise in wages, which some fear will "push" the Fed to raise rates. Wage gains don't cause inflation. They're a result of remarkable productivity gains that have let businesses give raises wages while also boosting profits and holding prices down.

Yet most people seem to think the economy's in trouble. No doubt, they fear higher oil prices and interest rates and the damage they could do. So do we. But unlike the rest of the media, we don't ignore the good news. And right now, there's plenty of that to go around. You read it here first.