The sudden reversal of economic confidence

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The latest jobs numbers are in and they're "surprisingly lackluster," said Jim Puzzanghera at the Los Angeles Times. The economy added just 98,000 new jobs in March, "a little more than half of what economists had expected." Analysts blamed severe winter weather in the Northeast for pushing job growth down to the lowest level in nearly a year. "But there also was some good news." The unemployment rate fell to 4.5 percent, "its lowest level in nearly a decade," and wages continued to show solid growth. Democrats pooh-poohed the jobs numbers as "disappointing," said Danny Vinik at Politico. But it wasn't that long ago that Democrats were defending similar reports. "It's not hard to decipher" what's changed since then: "Barack Obama left the White House, and Donald Trump entered it."

Data like unemployment, inflation, and consumer spending are increasingly becoming political "Rorschach tests," said Nelson Schwartz at The New York Times, "with Republicans convinced that a boom is at hand, and Democrats foreseeing an imminent recession." Before the election, in October, the University of Michigan's consumer expectations index was at 61.1 among Republicans, "the kind of reading typically reported in the depths of a recession." Democrats, on the other hand, notched an optimistic 95.4 reading. By March, Republicans' expectations had soared to 122.5, "equivalent to levels registered in boom times," while Democrats "were even more pessimistic than Republicans had been" in the fall. The sudden reversal has stunned economists. "We've never recorded this before," said Richard Curtin, who directs the University of Michigan's survey. "The partisan divide has never had as large an impact on consumers' economic expectations."

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But then rarely have economic indicators "sent such mixed signals," said The Economist. "Soft" data like business and consumer confidence are surging, while some "hard" economic data are not particularly impressive. The Atlanta Federal Reserve, for example, put annualized growth in the year's first quarter at a sluggish 1.2 percent, far short of President Trump's wildly ambitious promise of 4 percent. Industrial production is flat, and "banks have slowed business lending dramatically." Despite all that, the stock market is up 10 percent since the election. But if Trump isn't able to deliver on his promises of tax cuts and deregulation — an open question after the failure of the health-care reform bill — "the economic elation may subside."

In the meantime, jobs number are the wrong ones to focus on "at this stage of the recovery," said Neil Irwin at The New York Times. "When the economy is at risk of falling into a recession or struggling to grow out of one, the change in the jobs numbers really is the best single number to understand the state of the economy." But now that we're near full employment, other data points, like wage growth, are far more useful. March wages were strong, but after years of sluggish gains, "there's plenty of room" for pay to rise further. Then there's the employment-to-population ratio, which rose from 78.3 percent to 78.5 percent in March for workers between 25 and 54. That's progress, but still below its most recent high of 80.3 percent in 2007. The numbers still matter, but we have to pay attention to the right ones.