Economist Brian Wesbury has an interesting piece in the Chicago Sun-Times that argues that the US economy isn’t nearly as bad as we’re being told. The evidence he presents is compelling: sales of new homes, autos, and retail sales are up. Inflation-adjusted wages are up, as is productivity. The US economy has grown 3.4% in the last year – a modest figure, but one that is hardly worth panicking about.
Westbury blames the East Coast media establishment for creating this trend by focusing so heavily on the stock market. This is partially correct, but it just isn’t the media that’s making such a fuss of stocks. Markets are always volitile by nature, and sometime dramatically so. Yet after the 1995-2000 stock market boom, many Americans invested in the markets, and naturally started watching them more closely. To someone who is only accustomed to the booms of the last decade, the current market uncertainty would be worrying.
Yet it is important to note that those fundamentals are still strong. The real harbingers of economic strength are not solely confined to the stock and bond market. Wesbury also predicts that the market will stabilize as the Iraq issue is resolved and growth continues to pick up. He’s very likely right, so skittish investors shouldn’t fall into the trap of absolute pessimism – the recovery may already be underway.