Pessimism about the economy is rampant, but baffling. From 30,000 feet, the US economy looks fabulous. In October, household employment rose to 142.6 million, an all-time record high. Lately, initial claims have fallen back to pre-Katrina levels of about 320,000 per week, roughly 2.2% of total employment, a percentage not seen since the late 1990s.
Despite hurricanes and record high energy prices, personal income, wages and salaries, consumption of non-durable goods and services hit all time record highs in September. In recent months, corporate profits, federal tax receipts, the 6-month moving average of durable goods new orders, and household wealth have also climbed to record highs.
Since the tax cuts of 2003, US real GDP has grown 4.0% at an annual rate, and has experienced no quarter with less than 3.3% growth. For reference, the 50-year average growth rate of real GDP is 3.3% and economists surveyed by the Wall Street Journal expect real GDP to grow 3.3% in 2006.
This is my basic sense as well. While high energy prices are somewhat troubling (having purchased heating oil last week I can personally attest to this) they are not so high from a historic perspective to severely damage the economy. Other indicators seem great as well.
Where does the pessimism come from then?
(via The Skeptical Optomist