Tired of strolling through Wal-Mart or Costco with your family and salivating over those sub-$2,000, 50-inch flat screensbut not buying? (I've only heard about this strange phenomenon, of course.) Worried that the housing recession or higher energy prices might still tank the economy and the 60-month expansion? Fear not. There are plenty of good economic reasons to feel secure in finally laying out the big cash for the plasma.
So here are Five Reasons to Buy a Big Screen:
1. Gobs of jobs. The skimpy 4.5 percent unemployment ratethe lowest since the bubblicious '90s boomhardly tells just how strong the job market is right now. The economy has added an average of 161,000 new jobs a month for the past four months. Now add 68,000 to that numberthat's how much the Labor Department thinks it's been undercounting job growth. Lots of jobs means stronger wage growthand that keeps consumers spending.
2. Booming consuming. Retail sales soared by a huge 1 percent last month and are now advancing at a pace slightly more than the average rate of the past decade, according to economist Michael Darda. "This data throws another bucket of cold water on the growth pessimists' and economy bears' constant comparisons to the year 2000." He points out that in November 2000as the economy was weakeningreal retail sales were declining at a 6.2 percent annualized pace, with year-to-year growth of less than 1 percent. That was then and this is now.
3.The other wealth effect. While all eyes have been fixed on falling housing prices, less attention has been paid to rising stock prices, even with the Dow hitting record highs. At the end of the third quarter, according to economist Edward Yardeni and Federal Reserve data, the value of all stock held by households rose to $9.9 trillion, up $500 billion from a year ago. And guess what? Stocks are hardly expensive based on the market's price-earnings ratio of 17, just a bit above the historical average of 15.
4. Inflation cessation. Sure, the 2.0 percent jump in producer prices last month was the biggest since Battle of the Network Stars was must-see TV, but factor out a huge, anomalous jump in light-truck prices and the core increase was only 0.2 percent. Over the past six months, the core rate is up just 1.1 percent, annualized. And there's little evidence that companies have been able to pass higher costs onto consumers. The consumer price index rose just 0.48 percent in November leading at least one economics firm, Global Insight, to declare, "The inflation scare of 2006 is over."
5. Damage containment. Continued strong consumer spending is another sign the housing recession isn't infecting the rest of the economy. As Simon Kwan of the Federal Reserve Bank of San Francisco recently noted, "There is little evidence that the ongoing weakness in the housing sector is spilling over to the broader economy, and there are some tentative signs that the housing sector may be stabilizing." Research also shows little "pass through" of higher energy prices, according to consulting firm Macroeconomic Advisers. The economy is just far more resilient to surging prices than it was in the 1970s, partly due to greater energy efficiency.
Of course, there are no guarantees. Geopolitical events can always send shockwaves through the global economy. Rising protectionist sentiment in Washington could sour markets. The housing downturnthe first one caused by cooling speculative fever rather than rising interest ratesmight still play out in unexpected ways. The dollar could go into a complete tailspin, sparking higher inflation. And the Federal Reserve might start raising interest rates again and unexpectedly tank the economy. ...Maybe you better settle for the 42-incher.
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