When the New York Times has to reluctantly admit the existence of an economic boom, while doing everything in their power to minimize and distract from the basic facts, you know that a strong economy has really arrived.
First we had unemployment reported at a 6 year nationwide low of 4.7% - well under 4% in many areas of the country. A rate so low that only two years in the last 40 have had lower unemployment. In addition, the actual rate of employment is at a record high of over 66%, a rate exceeded by only 3 years in the last 40. That's good news, but the latest reports on the economy show even more encouraging data.
Job growth goes hand in hand with low unemployment, and in the first quarter of this year we've seen an unprecedented total of 590,000 new jobs added to the workforce. This continues the trend of massive job growth which has produced an impressive increase of 2.7 million new jobs since the first quarter of last year.
Another bit of good news in the job sector is that the trend for hourly wages to increase which began last year has continued, with the average non-farm hourly wage up $.55 an hour from March of last year, meaning more than $1000 a year in additional earnings for the average worker. Gains were strongest for highly skilled workers, with computer manufacturing jobs increasing by $.76 an hour on average, utility workers gaining $.81 an hour, those providing professional and business services going up $.93 an hour and the big winners were those in information services who gained $1.17 an hour. Overall this is the second largest rate of wage increase in any year since records started being kept in 1964. The average rate of wage increases in the last 40 years has been $.33 per year.
In the latest report from the Bureau of Economic Analysis the raw quarterly growth rate in the Gross Domestic Product for the first quarter of this year is reported at an unprecedented 8.2%. That's an incredible rate of economic growth, a full 3 points higher than the very impressive 5.2% reported in the fourth quarter of last year. Adjusted for the current value of the dollar the GDP growth was even better relative to last year, at 4.8% compared to 1.7% in the fourth quarter of 2005.
This GDP surge was largely driven by consumer spending - an area which had been lagging until recently - which increased by 7.4%in the first quarter of 2006. This was largely driven by a growth in personal income which started last year with a growth rate of 9.4% in the fourth quarter of 2005 and 6.7% in the first quarter of 2006. Disposable income was up even more impressively - despite increases in housing and fuel prices - by 9.8% in the fourth quarter and 5.8% in the first quarter of this year.
Business spending was up even more dramatically, although it's a smaller part of the economic picture. Spending on equipment and software was up 16.4% this quarter, the highest rate of business spending since the Tech Boom in the first quarter of 2000.
While consumers are spending more, the rate of increase in consumer borrowing, which has been an ongoing concern, has slowed significantly in the first quarter of 2006. February set a record low with borrowing increasing only 1.8%. This puts the first quarter significantly below last year's average, which was historically low. Even better, credit card borrowing - the worst kind for consumers - has been held to a growth rate of only 3%, the lowest rate in 13 years. The issue of consumer debt is being hit hard by the political left, especially on Air America Radio, but the data suggests that the strong growth in employment and wages more than negates the very low rate of growth in borrowing.
A positive side effect of this growth in personal income is an increase in projected income tax revenues, a trend which if it continues would have a significant impact on the deficit. The Congressional Budget Office projected a 12.6% growth in personal income tax revenues for 2006. However the rate of increase in income tax revenues for the first quarter is estimated at 17.2%. If that same trend of higher growth applies to corporate taxes and social security taxes the net result would be about an additional $100 billion to apply to the deficit, almost cutting the rate of increase in half, and leading to a balanced budget several years earlier than projected.
Core inflation (not including fuel and food) is also down from the fourth quarter of last year, at 2%. That means that those workers who are earning more and spending more are not seeing prices rise as much as they had been, giving them more purchasing power. Soaring oil prices will likely have a negative impact on overall inflation during the coming year, but they may be balanced out by a projected decrease in housing costs.
The economy is doing so well that the Federal Reserve is considering raising interest rates one more time to try to slow growth a little bit before laying off the rate increases for a couple of years.
For a desperate attempt to put a negative spin on all of this, don't forget to check out the article in the New York Times, where they try to throw in every possible red herring to distract from the simple fact that the Bush tax cuts - focusing heavily on the middle class and the working poor - have had a remarkable impact on a failing economy, turning it around and creating a burgeoning boom. This, of course, leads to one inevitable conclusion. We absolutely must make the tax cuts permanent to continue down the road to economic prosperity.