This is all part of a job-full recovery. Over the past three years, real GDP in the U.S. 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 AP; “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 twenty-five 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.