Interest Rate Raised Again

"The president and his squad of cheerleaders are really talking past working families, many of whom are far more economically insecure than you would know by looking at the top-line economic statistics," said Jared Bernstein, a labor economist at the liberal Economic Policy Institute.

On Monday, Snow acknowledged that the fruits of the recovery are not spreading equally, referring to less-educated workers whose wages have lagged behind others. But Bernstein said labor-participation statistics point to broader discontent in the workforce. Since the last economic peak in March 2001, job opportunities have increased for people without high school diplomas. There are fewer employment opportunities for high school graduates, people with some college education and college graduates.

Jeffrey N. Kleintop, chief investment strategist for PNC Advisors, said Bush put his finger on the real problem: Inflation remains low, but higher energy and health care prices are sticking in people's minds.

The average price of a gallon of unleaded gasoline reached $2.35 yesterday, according to AAA auto club, and oil prices closed just over $63 a barrel yesterday.

"Every day, you drive past a gas station and notice that prices are up," Kleintop said. "It doesn't matter that a DVD player costs a lot less. People are paying more for food and gasoline. They're feeling it at the drugstore each month when they go in to get pharmaceuticals."

Those bad feelings are not restraining consumer spending. Personal consumption rebounded in June, rising $72.2 billion, or 0.8 percent, after decreasing by 0.1 percent the previous month.

"They seem to be taking out those feelings by going to the mall to shop," Kleintop said.

In Texas, the administration's economic team told Bush that he is not getting credit for a strong economy in part because wage growth for many people is being eaten by higher health care costs. If the administration could slow the growth even a small amount, people would have more cash and give him more credit, a top official said. The official spoke on condition of anonymity because the meeting was private.

Premiums for employer-sponsored health plans rose 11.2 percent last year, much higher than the rate of inflation, while the number of uninsured reached 44.7 million in 2003, according to Kaiser Family Foundation, a nonpartisan group that tracks health care costs.

Such concerns are having little impact on overall economic health.

"Aggregate spending, despite high energy prices, appears to have strengthened since late winter, and labor market conditions continue to improve gradually," the Federal Open Market Committee said in its statement yesterday. "Core inflation has been relatively low in recent months and longer-term inflation expectations remain well contained."

Fed officials continue to think their interest rate increases are not applying the brakes to economic growth but simply lifting the foot off the accelerator, analysts said. Berner has been bullish on the economy's prospects all year, but recently raised his second-half growth projection to an annual rate of 4.5 percent, from an annual rate of 4 percent.

"The data has been even more resilient than I thought," he said.