Chef Bush
By Tom Adkins (04/04/05)
A funny thing happened on the way to a cooking up this strong economic recovery. Last week, unemployment went up. From 5.2% to 5.4%. Terrible, right? Except the same week, more jobs were added. Huh? Isn't that impossible? Lets get this straight. More jobs were added while unemployment rose? And we're supposed to trust egg-headed statisticians in white lab coats and fancy bazillion-function handheld calculators to accurately taste test the direction of the economy?
Actually, yes. See, the figures aren't the issue. Like all good dishes, it depends on your taste. But this interesting paradox actually passes the smell test. Take a whiff…
In a poor economy, companies shed jobs because people are spending less. There are fewer widgets to sell, so they fire the widget makers. Thus, more pink slips. In a hot economy, profits are being made, spending is cranking up and therefore more want ads appear.
But neither scenario is necessarily a good recipe. A hot economy can often entice the Federal Reserve to crank up interest rates to ward off inflation. Throw in a technical stock correction, a dot.com bubble and a few questionable statistics by an outgoing administration trying to stuff the numbers, and you have the 2000 recession. And a slow economy is, of course, rarely good, even if it does serve to shake out inefficiencies.
But moderate growth with low inflation and strong momentum is probably the perfect economic cauldron to brew economic stew. And let's take a look at the ingredients for our current concoction.
The 2000 slowdown cleaned the cookware by shedding the bloated inefficiencies of the late 90s. Interest rate cuts cranked up the oven. Tax cuts were the perfect sauce. Put in some raw capitalist meat and you have one hell of a dinner. And exactly how does it taste? Let's sample.
Retail profits? Up
Business investment? Up.
Real disposable income? Up 8.1% last quarter.
Personal savings? Doubled.
Productivity? Still rising.
And of course, no inflation, seven straight quarters of roughly 4% growth, real estate prices rising while home ownership is at record levels, and more people are employed than ever in history (132,843,000).
Man, that smells delicious.
The only flies in the ointment are the national deficit, trade deficit and the looming Baby Boomer retirement and all those fabulous entitlement boondoggles that they gave themselves. But those issues are already baked into the current economy. If they get resolved, it will only help. Regardless of how we dispose of those issues, it will be a lot easier with a stronger economy than a weak economy. And right now, tinkering with the economic recipe would create a wretched concoction.
But let's get back to that smell test. How can we add jobs while unemployment rises? Actually, that's an easy question. On one hand, the strong economy is adding newly created jobs. At the same time, the efficient companies are still shedding inefficient jobs. Plus, plenty of workers who had previously surrendered to a spot on the couch are now encouraged to return to job hunting. And new small businesses and their new employees don't show up in any statistics except the Household Survey, which shows massive employment gains. This is exactly how capitalism is supposed to work. And this is why we are cruising along with the best economy since Reagan.
Of course, most recent polling shows that despite the sweet smell of economic success, Americans perceive the economy as rather malodorous. Why? Because the conservative-hating liberal press just can't admit that tax cuts worked, and a Republican straightened it all out with supply side batter. They focus on sensational stories such as gasoline prices, and ignore the economic facts. You can bet that if a Democrat were in the White House, you would be bombarded with the fabulous news. But the same thing happens every day to great restaurants all over the world when they don't cook the critics favorite dish when he writes the review.
So how do we keep this lovely dish tasting so good? Easy. Just keep adding the ingredients. And it seems like we've got a good chef, who wisely ignored his critics who apparently prefer feasting on the starvation swill of Karl Marx and the rancid retch of Chairman Mao. Instead, though he sometimes samples a bit too much from John Maynard Keynes, Chef Bush is following suggestions from the famous cookbook of the old master chef Ronald Reagan. And that was one of the best feasts in American history.
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