WASHINGTON -- The American economy refuses to listen to all those doom-and-gloom proclamations, predicting we are marching headlong into a recession before the end of the year.
The professional pessimists who persistently peddle their predictions on the network news and business shows have been warning all year that the economy is headed toward the cliff. Many of them were at it again this week -- hoping against hope that their cataclysmic forecasts will come to pass.
Sunday's Washington Post began its lead story on the economy this way: "The economy is slowing, the dollar is falling. Wall Street is laying off workers. Defaults by homeowners are rising. Corporate buyouts have lost momentum."
A CNBC pundit was eagerly predicting that "we are heading into a recession" and that "it is going to happen soon." Wall Street was in a state of "denial," he said, as the Dow Jones sailed over 14,000, pulling the S&P 500 and the Nasdaq along with it.
In fact, Wall Street nowadays is almost wholly data-driven, and corporate earnings this year have been great, beating the gloomy forecasts. Stocks, beaten up by the sky-is-falling frenzy that has periodically hit the markets, have for the most part been following that data, and investors in all income groups have profited handsomely as a result.
No one doubts the economy is slowing, as housing sales lag and the days of easy credit to subprime borrowing has come to an end, but it is hard to see the $14 trillion-a-year economy plunging into a recession. The people who always see the glass as half empty, rather than half full, never mention the other vital statistics that suggest this economy continues to show signs of vitality, resilience and strength.
Last week's employment report was the latest sign that there's still life left in the U.S. economy, with 110,000 new jobs created in the month of September and a gain of 89,000 new jobs in August's payrolls, instead of an earlier estimate of 4,000 lost jobs.This is the 49th consecutive month of job growth, "setting a new record for the longest uninterrupted expansion of the U.S. labor market," the White House said Friday.
Since August 2003, the economy has created more than 8.1 million new jobs. Unemployment nationally is running at a low 4.7 percent, which most economists consider full employment.
OK, the dollar has been down against other currencies, but aside from making imports costlier over here, it has also made our exports a lot cheaper -- and thus more competitive -- overseas. American products are selling to the tune of about $1.2 trillion a year.
Owing to a strong global economy in Europe, Asia and Latin America, U.S. exports jumped by more than 14.8 percent in the 12 months that ended in July, cutting the trade deficit by $8.3 billion.
For much, if not most, of this year, the Federal Reserve Board has told us that the housing downturn and homeowner mortgage defaults have not spilled over into the larger economy. More recently, the Fed has hedged on that view, expressing concern that interest-rate resets on adjustable-rate loans could boost those defaults in the next year or two. That remains to be seen.
With the Fed pumping more liquidity into the banking and mortgage markets, the evidence suggests that the nation will weather this credit crunch, and there are signs that the housing sector has hit bottom and will begin to turn up. We'll see.
In the meantime, people should focus on what is good in the economy and not let the end-of-the-world crowd rule over common sense.
Still, the economy remains one of the top concerns among voters, after the war in Iraq and terrorism, according to a recent Gallup Poll. Yet Gallup also finds that "Americans are more positive about their personal financial situations than about the economy as a whole."
A chief reason for this satisfaction: Real after-tax per-capita personal income has risen more than 12.5 percent since Bush took office in 2001. In the past 12 months that ended in August, real wages have increased by 2.2 percent.
Nonetheless, the Democratic presidential front-runners say they will raise taxes on those who save and invest most, and impose costly regulations and taxes on energy companies, leaving businesses and motorists to foot the bill.
The Republicans are pushing lower tax rates to boost incomes and jobs, including zero taxes on savings, dividends and capital gains on the middle class and making medical expenses fully tax deductible.
The American electorate will get to decide in 2008 whose policies will keep the American economy growing and prosperous over the next four to eight years.