Suddenly it seems that everyone loves the U.S. economy. Jobs are picking up. Shoppers are spending. We're growing again!
I'm not sure why this is such a surprise to anyone. Obviously the stock market has been expecting this for quite some time.
It certainly shouldn’t be a surprise to readers of this column, who remember that we called the bottom in the near-depression in May of last year. All the statistics have pretty much been straight up since then.
By some measures, the economy is at all-time highs already. Believe it or not, that's true.
On Wednesday morning the Commerce Department released retail sales numbers. They were very strong in terms of growth. But I didn't hear anyone mention that "core" retail sales are now at all-time highs. That means you leave out autos, gasoline and building materials -- so you're just focusing on basic "stuff " that you buy everyday -- food, clothing, and (most recently) Apple iPads.
In fact, that all-time high isn't even new. It happened last month. And then this month it happened again.
Auto sales have perked up, too. Last month they were the strongest since last March -- but they're still way off all-time highs. But the point is that the core of our consumer economy is back -- all the way back.
Actually, the whole economy pretty much is all the way back, and has been for a while. It's just that nobody noticed. It kind of snuck up on us.
In the final quarter of last year, real (inflation adjusted) gross domestic product made all-time highs, if you just exclude one single distressed sector. I know it's hard to believe, but if you ignore the parts that economists call "fixed investment" -- which includes real estate and capital goods like industrial equipment , and accounts for only 12% of GDP -- then we're at record highs. The first quarter of 2010 has obviously been good, so I'm sure that the 88% of the economy other than fixed investment has set another record. We'll know officially in a week or so when the statistics are released.
Is it fair to exclude fixed investment? Maybe not, because it's an important part of the economy. But the point is that the majority of the economy -- consumption, exports and government -- are probably a lot healthier than most people realize. We've really just got that one problem child on our hands.
How about jobs? As I wrote here last week, there's still a lot not to like about the labor market in this country. If you are unemployed, it is still nearly impossible to get a job. But that's an improvement. At least some people are getting jobs now. Last month 264,000 more people became employed than had been employed the month before. That's progress. At least it's a start.
Note that these realities fly in the face of a very popular economic outlook calling for a complete collapse of the US consumer, and a resulting collapse of spending in the economy. You've probably heard this philosophy called the "new normal" -- referring to the idea that, in the future, it will be "normal" for consumers to scrimp and save, because they are so over-indebted and because jobs are so scarce.
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