NEWS

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November 4, 2007

Perception and reality on the economy

I'm so tired of stories like this in the newspapers. Someone will do some poll about satisfaction with the economy. The results will indicate that people are dissatisfied and then that is used as an implicit argument that the economy is in shambles. The latest example is this Washington Post poll that indicates that 2/3 of Americans give the economy a big thumbs down.But, honestly, it doesn't really matter what people tell their pollsters about the economy. What matters are things like the unemployment rate, GDP growth, and inflation data. All of which are signaling right now that the economy is in very good shape:

Here’s what you need to know about the October employment report: * +166,000 net new jobs were added in October. This is almost twice what the markets expected. * The unemployment rate is unchanged at 4.7%. * The US economy has created 1.68 M net new jobs over the past year, and 8.3 M since the labor market turnaround in August 2003. * We’ve had 50 months (4 years and 2 months) of continuous employment growth, a new record. * Wages are up 1.2% over the past year, adjusting for inflation. In other economic news, on Wednesday we got GDP data: * GDP grew 3.9% in the 3rd quarter, well above market expectations of about 3%. This is the strongest quarterly GDP growth in 1½ years. Extra happy. * We can see the effects of a strong labor market in the consumption numbers – people are working and their real incomes are climbing, so they’re buying more stuff. Since consumption is about 70% of the economy, strong consumption growth is critical to continued GDP growth. * Housing is still a drag – it knocked 1.1% off the third quarter growth number. This is bad but unsurprising. The silver lining is that there’s no evidence the housing decline is spilling over into consumption. * Business investment was solid. Investment in “equipment and software” grew at a 6% rate, the best in 1½ years. * Exports continue to be strong, and they now make up 1 in 8 dollars of our GDP (12%). The rest of the world is growing, and they’re buying our stuff.
Granted, I stole this from Greg Mankiw's blog and it was an email sent from a White House staffer, but so the source is biased. But still, it is hard to fudge those numbers and they are also overwhelmingly good.You wouldn't really have an idea of that if you got your news on the economy from any newspaper or cable TV show. All they seem to talk about is the house bubble or inequality. Both of those are problems, I admit, but they aren't the whole picture on the health of the economy.It seems pretty ridiculous to me for newspapers to skew their coverage of the economy to focus on every problem area. Then do polls on how satisfied people are with the economy and report how dissatisfied people are, when the main culprit in them feeling dissatisfied in the newspaper (and the media) in general.