Have Economists Got It Wrong About The U.S.? (Part 1) | WPN World People News

Five years ago, a subprime mortgage firestorm was melting down the U.S. economy, but most analysts didn't see it happening.

Workers build a Jeep Compass at the Chrysler assembly plant in Belvidere, Ill. Friday's employment report showed growth in manufacturing, much of which reflects the rebirth of the U.S. auto industry .

Federal Reserve Chairman Ben Bernanke, testifying before Congress in February 2007, said the housing sector "is a concern, but at this point we don't see it as being a broad financial concern or a major factor in assessing the course of the economy."

If he and the vast majority of economists were blind to the economic and financial calamity taking shape then, could they also be missing the start of a huge economic boom now?

Federal Reserve Chairman Ben Bernanke pauses during a hearing before the House Budget Committee on Feb. 28, 2007.

A boom? Really?

Maybe. On Friday, the Labor Department said employers added 243,000 net jobs – about 100,000 more than most economists were predicting. The unemployment rate fell to 8.3 percent, dropping two-tenths of a point to the lowest level in three years. As recently as August, the jobless rate was 9.1 percent.

In recent months, economists have been consistently wrong about the strength of hiring. In fact, the Labor Department said it had been too negative. It revised previous months to show that the economy gained a total of 60,000 jobs more than originally reported for November and December.

So if they were so wrong in seeing the Great Recession coming, it's possible they are blind to the "Great Recovery" that might be under way. If there is indeed a boom taking shape, it's being led by the new strength in the energy sector, agriculture, technology and even manufacturing.

Yes, manufacturing. Friday's report confirmed factories have been on a roll, adding 50,000 jobs for the month. A lot of that growth reflects the rebirth of the U.S. auto industry. Chrysler, for example, said Thursday that it plans to add 1,800 workers at its Illinois plant this year.

When people get jobs, they spend money. So companies involved in health care, leisure and hospitality added lots of jobs in January.

Maybe the surprising gains were just a fair-weather fluke last month. Temperatures were exceptionally warm in much of the country, so that might have boosted hiring. But the upward revisions for November and December suggest this could be a powerful trend.

Most economists have been predicting overall economic growth of only about 2 percent to 2.5 percent this year. Are they misunderstanding what's happening?

Source: NPR