Wednesday, October 31, 2007

If Things are So Bad, Why Are They So Good?

Don’t look now, but we’re in the middle of an economic boom.

The last two quarters are the strongest GDP in four years—just about 4 percent real growth. Consumer incomes are 4 percent ahead of last year, after taxes, after inflation.

The booming export sector has cancelled out the recessionary housing sector. The economy is speeding up. The jobs numbers we got from ADP today suggest that we could get 125,000, maybe 150,000 jobs on Friday. That’s post-August, post-credit crunch, post-pessimism, post-doom-and-gloom, and post-bearishness.

Look, I’m not saying we’re going to get 4 percent growth for the next four quarters. I acknowledge the housing recession. I acknowledge a lot more price-cutting is going to go on. I acknowledge pockets of credit freeze in the banking system and financial markets. But I also want to acknowledge the fact that a low-tax rate, low-inflation rate, low-interest rate economy is performing superbly. It’s shown itself to be extremely resilient. And that’s why the stock market has done so well this autumn.

I wish somebody would give this economy—the greatest-story-never-told—just a little credit. The fact is that stock prices are hovering near record highs, inflation is coming down, growth is going up, and jobs are going up.

We can forecast until we’re all blue in the face. But the reality is that the economy looks a lot better than the prognosticators suggest.