Friday, September 01, 2006

Pardon the Repetition, But it Remains the Greatest Story Never Told

The August jobs report should lay to rest any fears that the economy is burning out. Following upwardly revised increases to June, where employers boosted jobs by 134 thousand, and July, where 121 thousand jobs were added, the August report showed that companies added 128 thousand nonfarm payrolls. Even more, household employment gained 250 thousand, while the unemployment rate eased back to 4.7 percent from the July reading of 4.8 percent.

In other words, the US economy is alive and well. Prosperity continues. The cult of the bear, fussing about a housing-related recession, has once more been proven wrong. Indeed, one might say that the US is approaching full employment.

On another front, over the past week, a spate of news stories has proclaimed that median real worker wages are stagnating. A front page New York Times story led this pessimistic parade, followed by columns in the Washington Post by liberal Harold Meyerson, and then another one by proverbial declinist Paul Krugman in the NYT. But all these opinions conveniently choose the narrowest measure of weekly earnings.

Instead, a broader measure called total compensation, which includes tax-free retirement and health benefits, paints a much brighter picture. Over the 2000-05 period, inflation-adjusted total compensation has increased nearly 2 percent per year, compared to less than 1 percent for real median usual weekly earnings. This of course includes the gasoline price sticker shock that has eroded both measures. Over the past 5 years, the broader compensation gauge has grown over 13 percent, or 2.4 percent annually, whereas median earnings gained only 5.7 percent, or 1.1 percent yearly.

Probably the best measure of worker spending power is what people have actually bought and consumed. Inflation-adjusted personal spending rose 7.5% percent over two years, 3.7 percent annually. Over the last 5 years, real consumer spending has gain 16.3 percent or 3.1 percent annually. It’s okay to have pessimistic points of view, even though these naysayers are wrong. But it’s not okay to cherry pick data in order to a show worst case scenario, from which various authors engage in economic Bush-bashing as though it is holy writ.

The real truth is that the American economy is doing quite well, as illustrated by rising jobs, incomes, and spending habits. Noteworthy, as we move in to the November election cycle, gasoline prices at the pump are falling markedly, and some experts are looking for $2.5 gasoline by early November. Meanwhile, a strong, highly profitable business sector is picking up the slack from a housing slowdown. Benefiting from low taxes and deregulation, the resilient, flexible, free-market American economy remains the economy of the world’s envy, while it is the enemy of the left here at home. Pardon my repetition, but it remains the greatest story never told.