Up the Stairs ... to the Landing

SHELBYVILLE -- I don't have ... to sell my soul.

He's already in me.

I don't want ... to sell my soul.

He's already in me.

And some would charge that this morning's economic releases confirm it.

First up: The

gross domestic product

numbers for the January-March period.

Consumption rose at an 8.3% rate during the first quarter (this number is not shown in the table), and, because it accounts for roughly 68% of GDP, it contributed roughly 5.5 percentage points (or 0.083 times 0.68) to the first-quarter growth rate. Recalling the familiar equation that GDP = C + I + G + X (and still looking at the first quarter), note that 5.4 equals (roughly) 5.50 plus 1.38 minus 0.18 minus 1.31. Also note that investment comes in four forms: business equipment, residential buildings, commercial buildings, and inventories. I (again looking at the first quarter) equals 2.10 plus 0.29 plus 0.37 minus 1.39 equals (roughly) 1.38.

This economy has now produced three straight quarters of plus-five growth. The last time that happened? Nineteen eighty-four. Further, lookit whats goin on with final sales to domestic purchasers. This broadest measure of domestic demand (which you can find in Tables 1 and 3 of the GDP release) -- consumption plus investment (excluding inventories) plus gubmint spending -- rose 7.1% last year. That went down as the biggest FSDP increase since 1998. And as April began? This thing was rising at an 8.4% (!) year-on-year rate.

Then consider the core (excluding food and energy) chain-type price index for personal consumption expenditure. It troughed at a 1.0% year-on-year rate during the third quarter of 1997. It was rising at a 1.5% rate as of the fourth quarter of last year, and that pace accelerated to 1.6% during the first quarter of this year.

Then consider the

employment cost index

for the January-February-March period. The updated chart on our economic indicators

page says it all: This thing spent a looong time bottoming ... but now it's turning up. It troughed at a 2.7% year-on-year rate during the final quarter of 1995; it's rising at a 4.3% rate now. That goes down as its fastest pace of acceleration since 1993. Also note that the

benefits portion of the index is now rising at a 5.0% rate (a pace of acceleration not seen in almost seven years) and that the wages and

salaries portion of the index is now rising at a 4.0% rate (up from its 2.7% 1993 trough).

All things considered?

These numbers are entirely erotic. Like a beautiful woman pumping gas.

And that'll keep central bankers busy for some time yet.

Side Dish

What's going on with the bond is nothing more than a consolidation phase in a fundamental bull market.

And there you have it.