TINY BUBBLES AND BIG WHINING:

U.S. Economy Still Expanding at Rapid Pace (DAVID LEONHARDT and VIKAS BAJAJ, 4/28/06, NY Times)

Gas prices are rising, as are mortgage rates. House prices in many once-hot markets have started slipping. The American automobile industry shows no sign of recovery. And the paychecks of most workers have not even kept up with inflation over the last four years.

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.

"The good news for the U.S. is that growth has diversified," said Nariman Behravesh, chief economist at Global Insight, an economic research firm. "We aren't just relying on the consumer and housing."

U.S. Economy Grew 4.8% in 1st Qtr, Most in Two Years (Bloomberg, 4/28/06)

The U.S. economy expanded in the first quarter at an annual pace of 4.8 percent, the fastest in more than two years, led by resurgent consumer spending and the biggest jump in business investment since 2000.

The rise in gross domestic product, the value of all goods and services produced in the U.S., followed a 1.7 percent annual rate of increase in the previous three months, the Commerce Department reported today in Washington. Consumer spending on durable goods such as appliances rose the most since 2001.

Growth in jobs and wages and unseasonably warm weather spurred shopping at retailers and auto dealers, while businesses invested in equipment and software at the fastest pace in six years. Federal Reserve Chairman Ben S. Bernanke yesterday said growth may moderate as the year progresses and allow the Fed to pause in its series of interest-rate increases.

MORE:
Market fuel prices drop (Patrice Hill, April 28, 2006, THE WASHINGTON TIMES)

Oil and gasoline prices took another tumble in New York trading yesterday on signs of increasing supplies and slackening demand in the United States and China, adding to an 18-cent drop in wholesale gas prices that likely will produce relief at the pump in the days ahead. [...]

The biggest factors causing price drops have been signs that demand for gas is running about 1 percentage point behind last year's level -- most likely in response to the rapid run-up in pump prices since last month -- even as refineries are racing to take advantage of high prices and increase scarce supplies of summer fuels.

"At the end of the day, the best cure for high prices is high prices," said David Hackett, president of Stillwater Associates LLC, an energy-consulting company, noting that consumers are angry about high prices and apparently are beginning to balk at paying them.

If the Fed treats such price hikes as unsustainable they are.

Posted by Orrin Judd at April 28, 2006 8:09 AM