The Economy: Whither Thou Goest?

It's obvious that I'm not an economist. I seem to be in the minority of people puzzled that the stock markets have been as healthy as they have been in the last two years in a climate of high energy prices, huge budget deficits, a huge trade deficit, poor quality job creation, lost manufacturing jobs, nonproductive corruption in Washington and the real possibility of Bush's third war. I wish I knew what others know that I don't (but those of us in the minority may be gaining some company; see here and here).

Of course, Paul Krugman of The New York Times has been concerned by the odd numbers for some time. And elsewhere, blogger Steve Soto of The Left Coaster has a post that begins by noting the poor job growth numbers:

I don’t see how any Bush cheerleader can spin today’s jobs report for May. The consensus among economists appeared to be that the Labor Department would report another 170,000-180,000 new jobs were added in May. Well, they were only off by about 100,000. Instead, only 75,000 new jobs were created in May. Worse yet, and calling into question those highly-touted numbers by the White House these last eight weeks, the Labor Department also reported that their numbers for March and April were being revised downward as well. In fact, some economists are now wondering if a downturn is possible in the second half of this year.

The economy added just over 300,000 jobs in March and April combined, rather than the 338,000 originally reported. Factory jobs were actually lost last month heading into summer, and average hourly earnings went up less than economists were expecting at a time of escalating gas prices. Also, the average time the unemployed spent looking for work went up last month for the first time since February. It was also reported just now that factory orders fell the most in three months.

I read somewhere earlier today, I believe over at Daily Kos, that someone suggested that we simply throw the economic numbers out because with this administration one can hardly trust any of the numbers that it publishes (certainly true when it comes to budget numbers). Early in 1993, some of Clinton's advisers argued that the numbers they had been given in 1992 by the first Bush Administration were so far off they had to start over again. Although the stock markets have had some jitters lately, people seem to have enough confidence in the numbers to keep buying. But that's usually the case just before the prices start to fall (and weren't investors in Enron fooled by seemingly excellent numbers?).

What we do know is that in recent years American markets have been sustained by a lot of money from Asia and from oil-producing countries. An excess of money going into the markets can obscure the true fundamentals of an economy, particularly if that money is generating a certain level of consumerism, say as in refinanced homes or tax cuts financed by bonds as far as the eye can see. But, there I go again. I'm not an economist.

Let me end by letting Molly Ivins have the final word:

Ever hopeful that some good might yet be pulled from the rubble, the appointment of Henry Paulson as treasury secretary raises hope among the never-say-die crowd. He's good on global warming -- how's that for a change? But the real irony is that the administration had to bring in someone who can "soothe Wall Street," which is said to be "nervous." This whole administration has been run to favor, and grant tax breaks to, "Wall Street." How dare the ungrateful louses be "nervous"?