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April 12, 2006

Newsweek: Strong Economy May Hurt Economy (!!!...?)

From the What the Eff Department Of Incredible Liberal Bias:

Productivity normally rises and falls with the business cycle. Coming out of recession, companies make do for as long as possible with the staff they have on hand. In the current upturn, corporate America has exercised unprecedented hiring restraint in order to make up for excesses of the bubble years, says Morgan Stanley chief U.S. economist Richard Berner. The upside of the "jobless recovery" was that by producing more with fewer workers, companies drove up productivity. Inflation stayed low. U.S. growth continued to outpace our major rivals, Europe and Japan, by a huge margin.

But now pent-up demand for workers looks ready to bust out. Growth in job openings is outrunning growth in the number of people with jobs. That could lead to a surge in employment—and slow the rise in output per worker. Berner is predicting that the U.S. productivity growth rate will slip back to about 2 percent this year and next.

Why should we care? Productivity growth is economic magic. It effectively sets the speed limit for inflation-free growth, because the more each worker produces, the faster companies can grow without raising prices. So a productivity slowdown would signal an end to the harmonic convergence of high growth and negligible inflation that America has enjoyed virtually uninterrupted for nearly a decade.

The basic point of the article is, as far as I know, accurate. I object to the tone. And I question the timing.

The MSM -- especially super-liberal elements of it, like Newsweek and the NYT -- are only interested in running negative stories about the economy.

When housing prices rise, property-owners are happy. They get more money for rent and sale, of course.

When housing prices fall, property owners are sad, but renters and buyers are happy.

Obviously.

But the press seems to selectively report the "happy" end of things when, say, Clinton is in office -- Property Values Skyrocket! Homeonwers Ecstatic! -- and the negative side when a Republican is in office -- Property Values Skyrocket; First-Time Home Buyers Cannot Afford Decent Housing; Women, Minorities Hardest Hit.

Whenever property values rise, you can write either story; they're both equally true. Homeonwers happy, renters sad.

Which of those two stories a reporter writes depends only on his sympathy for, or animus towards, the administration in power. He can always choose to write either an upbeat or downbeat story; each is always true. It's only partisan bias that makes him choose one or the other.

As is the case with this story.

Newsweek only admits now that what has been going on the past three years -- superb productivity gains, resulting in a true strengthening of the economy, growth without inflation -- was a good thing, now that it may be about to end.

Before, Newsweek bemoaned the lack of gangbusters hiring -- the "jobless economy" we've heard so very much about -- without acknowledging the upside of modest (but good) job growth was that companies were growing sensibly and strongly with respect to hiring, not overhiring in a way likely to provoke a bubble and the inevitable bursting of that bubble.

Only now that that it looks like companies are hiring a lot more people do they admit that the "jobless recovery" (which wasn't jobless at all, but whatever) was fundamentally sound.

I've noted this a bunch of times before: The MSM is only willing to acknowlege the economy is strong in stories predicting it is about to weaken. Only when the scary prediction of a collapsing economy is discussed will they admit the economy is currently actually strong.

Bush can never get the political benefit of a strong economy, because the media will never admit it as such until it has passed. Only when the business cycle turns, as it it one day will, to a recessionary period will the MSM then admit the economy had been strong.

In order to contrast what had been good to what is now bad. Without ever acknowledging things were good at the time.

And so it goes.

Productivity and job growth are always at odds. (Or almost alwaysat odds, absent some major outside change in basic productivity, as the information revolution was.) When producitivity grows, it is all but inevitable hiring will be lower, as that is, after all, the basic math of thing. Productivity means more output with less workers, after all.

When job hiring explodes, or wages grow, productivity will naturally suffer.

It's a yin-yang thing.

But the press always, relentlessly, single-mindedly emphasizes the negative side of whatever trend is in motion, and will continue doing so until the public finally listens to them and elects Hillary! to the Presidency.

Then, once again, we will only read or hear about the positive sides of the economy -- Productivity Rises! if the economy isn't producing many jobs, or Hiring Explodes! if America is producing jobs at the expense of producitivity.

So, productivity gains with modest hiring growth was a good thing all along.

Funny that Newsweek only gets around to mentioning this as many economists thing this "economic magic" is about to end.

Thanks to Robert R.

The Republican Tax: I've said this before, but I think we've got to accept we will always, as a country, have to pay a "tax" on having a Republican president in office, because the media, through relentlessly negative coverage of Republcian economies, will sabotage consumer confidence and thus reduce the actual strength of the economy (not just the perception thereof) a fraction of a percent or so.


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posted by Ace at 03:02 PM

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