Economic growth has been solid, not just here but around the world. Corporate profits are up 25 percent, cash flow even more than that. The slide in the dollar ought to be chipping away at the trade deficit, boosting exports and dampening demand for imports. Interest rates are still low, keeping the housing market healthy. And to top it off, the federal government is spending like crazy, racking up a record budget deficit.
So why, asked economist James Paulson last week, is this such an unconvincing and uninspiring recovery?
Lack of confidence looks to be the major culprit. That would be confidence on the part of business owners and corporate executives who are sitting on big piles of cash but haven't yet conjured up the competitive "animal spirits" to invest some of it in new products or equipment or a new marketing assault. But it is also the confidence of consumers, the result of higher oil prices, threats of terrorism and a generalized anxiety about jobs.
The telltale signs of this drooping confidence could be found last week in announcements from Ford and General Motors that they will cut production 7 percent in the final quarter as a result of lower-than-expected sales. It was confirmed by Wal-Mart and other popularly priced retailers that reported the third month in a row of disappointing same-store sales. And it was strongly suggested by Intel, a reliable bellwether for the tech sector, which said softening consumer demand for personal computers and mobile phones had clouded its outlook.
Even the government's report of 144,000 new jobs in August, while respectable, wasn't anything to cheer about. The modest drop in the unemployment rate, to 5.4 percent, was in no small part due to people dropping out of the labor market.
Lack of confidence is compounded in many households by a lack of money, once the increased costs of energy, food and health insurance are weighed against meager wage gains. On this Labor Day weekend, it is probably fair to say that what the nation needs is a good pay raise. But the ongoing pressures of global competition, and the insatiable demand of Wall Street for growth in earnings, continue to keep a tight lid on the kind of across-the-board pay increases that come with genuine recoveries. Even workers with special skills remain reluctant to try to leverage them.
Don't look to Washington to fix any of this -- in the short run there is little anyone in government can do. Things would certainly get a boost if somehow the $10 to $15 "terrorism premium" could be wrung out of the price of each barrel of oil. Or it could be the stock market that provides the spark, with a pre-election rally that persuades executives to loosen the purse strings.
Absent that, however, look for the economy to continue to drift, looking for someone or something to provide it some energy and some direction.