- The Washington Times - Wednesday, March 3, 2004

The unemployed and the White House got some very welcome economic news this week with reports showing that the recovery remains solidly on track for a big election year comeback.

The news may not have been as welcome to Massachusetts Sen. John Kerry’s presidential campaign because — let’s face it — if the U.S. economy is growing over the next eight months, gradually reducing the jobless rate, the Democrats’ biggest issue will no longer be the vote-getter they hope it will be.

Three reports on Tuesday showed that the manufacturing sector was continuing its rebound and, equally important, producing more jobs, while consumer spending continued to rise and construction remained strong.

No number is more closely watched than the manufacturing index kept by the Institute for Supply Management. It showed that the manufacturing sector grew for the ninth month in a row in February. While the index was 61.4 last month, below the 62 points forecast by economic analysts, any rating above 50 signals expansion.

Earlier reports showed that manufacturing orders continued to show solid growth — helped in large part by rising exports fueled by a weaker dollar, which makes U.S. manufactured goods less expensive abroad. Factory production and new orders have grown for 10 straight months.

Notably, the ISM’s employment index alone rose from 52.9 to 56.3, the fourth consecutive month of job growth expansion and the highest it has been since December 1987. Though there has not been the really big job growth numbers of previous recoveries, at least not yet, manufacturing is expanding and a lot of companies are cautiously beginning to add jobs to their payrolls.

At the same time, the Commerce Department says consumer spending rose in January by 0.4 percent, while disposable income rose by an even more robust 0.8 percent.

Recent consumer confidence indexes have declined, but that has not affected spending, which continues to rise.

Construction took a dip in January, for the first time in nearly a year, but the numbers remain strong, fueled by lower mortgage interest rates and a growing economy.

Investors and business economists reacted positively to the economic data. With some predictable corrections and profit-taking this year, we are in the midst of a strong bull market that will likely last throughout this year and into the next.

“I think we’re actually in the early stages of an expansion,” says Gary Thayer, chief economist at A.G. Edwards & Sons. “It doesn’t look like we’re firing on all cylinders yet, and there are still some pockets of weakness. But the economy as a whole is looking considerably better than it did at this time last year.”

All of this is fueling optimism that the recovery is picking up momentum and that further job gains can’t be far behind. By my estimates, we should add about 2 million new jobs before the year is out.

Several trends are coming together to make this a very good year for faster economic growth:

.Inflation remains tame. It barely nudged upward by 0.1 percent in January, according to the Commerce Department, up from 0.2 percent in December. This means, among other things, that the Fed will be under no pressure to raise interest rates for the foreseeable future. That will reassure investors and likely boost stock prices.

.The S&P; 500 materials index jumped by 1.6 percent, its second biggest increase ever — signaling increased strength in the commodities sector, a key precursor to long-term growth. Copper, steel and other critical industrial commodities are all up, big time.

.For a lot of American investors, the Asian and major European markets have been showing surprising growth in recent months. Japan is clearly in a strong comeback cycle, which can only help U.S. exports and investments there and throughout the region.

.The Bush tax cuts — despite continued carping from the Democrats who never met a tax increase they didn’t like — are here to stay for the rest of this decade and probably beyond. That is going to continue to undergird long-term investment confidence, income growth and job creation.

.The geopolitical environment also is much improved. Afghanistan and Iraq are moving toward democratic reforms. North Korea is sitting at the negotiating table with its neighbors. The Asian tigers are showing new life in the global economy. Free trade pacts are sprouting once again.

There will be the usual ups and downs in the financial markets in the coming year. There are no economic lines that go straight up in a free market.

But we are entering a period of prolonged global growth. That’s good news for anyone looking for a job, including George Bush who wants to keep his for another four years. No president has ever been denied a second term with the economy growing at 4 percent or better.

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide