The U.S. economy, by most conventional measures, has picked up the pace of its expansion in recent months.  But where are the jobs?    Healthy increases in retail salesunderscore robust consumer confidence, no matter what other surveys may say.  Low interest rates continue to spur the home refinancing industry, which, taken together with tax refund checks, provide plenty of cash to fuel more spending. 

The industrial economy is coming off of its strongest quarter in three and a half years, and may do even better in the first three months of 2004.  February’s strong 1 percent monthly gain in the manufacturing component of the Index of Industrial Production puts factory output within a few percent of its pre-recession peak.  But where are the jobs?

That simple question is getting asked just about everywhere you go nowadays.  The prevailing sentiment in the business media is that weak job growth in the U.S. economy has economists stumped and forecasters worried.  But that’s only half correct.

First off, forecasters are always worried.  It’s part of the job, after all.  When you put it in writing where the economy is heading, you’re going to be wrong most of the time. So you worry a lot about the threats that will make your forecast go awry, and many of those worries find themselves in print.

Yes, weak job growth could cut into growth in personal income, which in turn threatens consumer spending.  But this concern is no larger, or no smaller, than other risks to our forecasts, including energy price shocks, renewed inflation, or even terrorist attacks. And the forecasts themselves – what we put down in writing -- remain decidedly upbeat.

It’s also true that economists have not put their finger on exactly why the U.S. economy is not producing the 150,000 or so newpayroll jobs every month that most of us would expect at this stage in a recovery.  But, to be fair about it, we really haven’t had a chance.  It will take at least three or four years before we have enough solid information on the economy to really pin down what’s holding today’s job growth in check, and by that time we’ll all be talking about something else.

There’s also no lack of ideas on the subject. It’s the political season, and to borrow that famous movie phrase, partisans on all sides have rounded up “the usual suspects.”  But blaming corporations or foreign trade for destroying jobs is like blaming rain and sunshine for destroying crops.  A more reasonable approach examines U.S. job growth in the context of the global economy.

After all, the U.S. economy is creating jobs – hundreds of thousands of jobs, actually. Most of these jobs are overseas.  Industrial output in China, for example, was up an astounding 23.2 percent in February from a year ago, led by a blistering 40 percent growth in exports.  Malaysia has also enjoyed double-digit growth.  Even in weaker economies like South Korea, export growth is strong.

 In the U.S. we have some job growth – about 300,000 net new jobs since last October – and strong gains in productivity. These facts paint a picture of an American economy that is pursuing the gains of specialization, jettisoning lower skill, production oriented jobs in favor of those with higher value-added.  That helps keep our products and services competitive in the global marketplace, even as their domestically-produced content goes down.

The bottom line is that the higher productivity that is helping pay for our increased health care costs, higher energy costs, as well as funding our retirements, has been achieved by subtraction as well as addition.  When this process will stop, and where it will take us, remains to be seen.