Prosperity is Just...

Just noticed a couple reports on RCP — and let’s hope they’re right. First up, Gallup says unadjusted unemployment fell to 8.3% last month. Adjusted, and that’s where the magic comes in, the rate could be below 9.0% for the first time in approximately ever.

What accounts for the new hiring? Solid 3.5% GDP growth in Q3, according to First Trust (PDF). Strong auto sales (up an 11.7% annualized) and retails sales (4.5%, annualized). Government purchased account for half a point out of the three and a half. Best of all, residential construction was up an annualized 4%.

First Trust adds:

With the Fed accommodative, and productivity strong, we never believed the pessimistic narrative. Conventional wisdom has been wrong. With most monthly data in, it looks like real GDP grew at a 3.5% annualized growth rate in the third quarter of 2011.

And this is the part that has me worried about their numbers. First Trust thinks Q1 GDP will get revised upwards “significantly,” because they also beleive that personal incomes shot up that quarter. But Drudge links to this New York Times story on consumer gloom:

The United States has a confidence problem: a nation long defined by irrational exuberance has turned gloomy about tomorrow. Consumers are holding back, businesses are suffering and the economy is barely growing.

There are good reasons for gloom — incomes have declined, many people cannot find jobs, few trust the government to make things better — but as Federal Reserve chairman, Ben Bernanke, noted earlier this year, those problems are not sufficient to explain the depth of the funk.

That has led a growing number of economists to argue that the collapse of housing prices, a defining feature of this downturn, is also a critical and underappreciated impediment to recovery. Americans have lost a vast amount of wealth, and they have lost faith in housing as an investment. They lack money, and they lack the confidence that they will have more money tomorrow.

Many say they believe that the bust has permanently changed their financial trajectory.

When personal incomes are on the rise — as the folks at First Trust claim — consumer confidence typically increases, too. And the strong residential construction number doesn’t jibe with a still-glutted market. Who is going to buy those home — the 28% of Americans who couldn’t sell their homes if they wanted to, because they’re underwater on the loan?

Don’t get me wrong — I hope that First Trust and Gallup have it right. We’re in a serious funk, financially and emotionally. Only solid, sustained growth will lift us out of it. But I’m just not seeing it yet, and it seems most Americans aren’t feeling it yet. But there’s no need to make rush judgement. Let’s see how retailers behave during the holiday shopping season before we declare it’s the end of the world or that happy days are here again.