| Doom and gloom at the NYT. Big time EFL. |
Yet the national economy continues to speed ahead, with families and businesses spending money at an impressive pace. Forecasters expect the Commerce Department to report this morning that the economy grew at a rate of around 5 percent in the first quarter, the biggest increase since 2003.
The industries leading the way are ones that have been receiving far less attention than cars or real estate, though they have been adding thousands of new workers each month. In the last year, hospitals, doctors' offices and other health care employers have created almost 300,000 jobs; restaurants have added 230,000; and local governments — including schools — have added 170,000.
Testifying before Congress yesterday, Ben S. Bernanke, the chairman of the Federal Reserve, suggested that the Fed would soon take time out from steadily raising its benchmark short-term interest rate to weigh the impact of its two-year money-tightening campaign. While he is counting on growth to slow to a more moderate rate, Mr. Bernanke said, "The economy has been performing well and the near-term prospects look good."
Americans seem to have noticed the boom, too. Although polling suggests that they are deeply unhappy with the war in Iraq and worried about the price of gas, they report being generally pleased with the state of the economy. A well-known index of consumer confidence has risen to its highest level in four years, according to the Conference Board, a research company in New York. In the most recent CBS News poll, conducted last month, 55 percent of respondents rated the economy as good, even though 66 percent of Americans said the country was on the wrong track. In 23 years of polling by CBS, only once — in late 2005 — did a higher percentage of people say the country was on the wrong track.
| The NYT can always find the black lining in the silver cloud. |
Healthy economic growth in other countries, including China and India, is also playing a role. Although this country buys far more from those countries than it sells to them, strong global growth is lifting American exports, economists say. Last week, the International Monetary Fund predicted that the world economy would grow at 4.9 percent this year, up from 4.8 percent in 2005.
In the short term, the bigger economic risks may be that interest rates or gas prices reach a tipping point that damages growth. James W. Paulsen, chief investment strategist for Wells Capital Management, noted that in past decades the economy often continued to flourish even as interest rates were increasing — until long-term borrowing costs jumped above 6 percent. At that level, companies often struggle to make a large enough profit to cover their costs, so they stop expanding. "There's no magic number," Mr. Paulsen. "But it does seem like the relationship changes around that 5œ or 6œ area." The rate on 10-year Treasury notes closed at 5.07 percent yesterday, up from 4.55 percent at the end of February.