More Than Half Full

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The New York Sun

You can’t win with the economic pessimists. The cult of the bear still reigns supreme in most corners of Wall Street and the mainstream media, as those who want to tear down the economy continue to manufacture justifications for their declinist American views. If jobs reports come in above expectations, the naysayers predict inflation. When they come in below, the pessimists predict recession.

So it was with Friday’s 75,000 increase in non-farm payrolls for May. That number was greeted derisively, despite the fact that over the past 33 consecutive months, 5.3 million new jobs have been created. Through the year ending in May, 1.9 million new jobs have been created, with the unemployment rate moving down to 4.6 percent – the lowest rate in nearly five years and below the average of the last 45 years.

But wait – there’s even more good news being clouded out by the pessimist frowns: The Labor Department’s household survey, which focuses on self-employed owner-operators of new entrepreneurial businesses, showed a booming May jobs increase of 288,000.You won’t likely hear a peep about this in the mainstream media, which shuns this survey month after month.


Year to date, the entrepreneurial household sector has produced 1.2 million new jobs (326,000 of which are self-employed), compared to only 730,000 from the corporate establishment payroll survey. Historically, when a big spread opens up between these two series, it is the payroll survey that gets revised upward, or that catches up in future months. This was particularly the case in 2003 and 2004, when the Democrats who proclaimed a “jobless recovery” had to eat crow.

Studies done by the Labor Department acknowledge the importance of the household data, from which the unemployment rate is derived. And economists at the Bureau of Labor Statistics have offered a “split the difference” rule of thumb to reconcile the two surveys. Using this approach, you get 964,000 new jobs year-to-date, or 193,000 per month. Pretty darn impressive.

The economy is so strong that more and more people are still entering the labor force in search of new work. The civilian labor force has expanded by 838,000 this year. Meanwhile, the number of people who are not in the labor force but want to work is up 400,000. Discouraged workers are down 128,000.


Right now, total employment in the United States stands at a record high of 144 million. This is a big number, just as 4.6 percent unemployment is a low number. In fact, the number of unemployed has dropped by 2.2 million since the mid-2003 peak, and by 400,000 this year alone.

This is all part of a job-full recovery. Over the past three years, real GDP in the United States has been averaging 4 percent annually. After-tax business profits, the mother’s milk of business and the stock market, are at a record high. And despite rising gas prices, consumers are still spending, according to the May report of comparable same-store retail sales. Headlines here have been telling: “Consumers Shop With Enthusiasm in May,” writes The Associated Press; “Retailers Report Solid May Sales as Department Stores Stand Out,” submits The Wall Street Journal.

And why are consumers spending? Because jobs are rising and incomes are expanding. Average hourly earnings in the May jobs report are running 3.7 percent above the year-ago level, while average weekly earnings are growing at 4 percent. Both numbers are traveling well ahead of inflation, even when you figure in the gas spike.


Most important, salary gains are being earned through record productivity. Non-financial business output per hour is rising at 3.7 percent. That means productivity-adjusted labor costs are actually falling by nearly 1 percent per annum. In other words, members of the workforce are getting raises that do not interfere with business profitability. So this is win-win for capital and labor, an unusually virtuous circumstance. When you add in the extension of record-low tax rates on capital formation, the forecast is for a continuation of this highly favorable economic scenario for years to come.

Put politics and Bush-bashing aside for a moment. You know what? The real economic truth is that it doesn’t get much better than this. And “this” is yet another chapter in a long-playing story that goes back to the Reagan revolution of 25 years ago, when America’s free-market entrepreneurial capitalist system was reformed, resurrected and streamlined.

Nitpickers and ankle-biters will always see the economic glass as much less than half empty. I continue to view it as much more than half-full. And the data are there to prove it.

Mr. Kudlow is host of CNBC’s “Kudlow & Company.”

The New York Sun

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