A pleasant surprise in March hiring has pushed up all long-term rates: 10-year Treasurys to 3.94 percent, and mortgages to 5.25 percent.

Even better news than the jobs: Rates could have gone a great deal higher. Other new data this week were as positive as employment: the Institute for Supply Management’s survey of manufacturing in March jumped past expectations to the best reading since 2004, to a 59.6 reading. The level of industrial activity is still below pre-recession, but improvement is clear.

Rebounding auto sales are pulling all the way through the supply chain — from inventory rebuilding, to the shop floor, to raw materials. Sales were 10.4 million in 2009, and the pace now is 12 million (however, note the average from 1997 to 2007 was 16.8 million). Hot emerging markets are also pulling exports from our most competitive industries, notably heavy equipment and information technology.

All financial markets have been locked in debate for a year, one side expecting a V-shape recovery and attendant inflation and rate explosion, the other skeptical of any recovery at all. The traditional hair-trigger for a "V" event, in every recovery for 60 years: the turn in the job market to self-feeding positive. Is this it?


The most important testimony: the bond market. Yes, it is a semi-closed day, Good Friday, but thin markets tend to magnify surprises, not dampen them. That rates have not rocketed today reflects the eye-glazing detail in the Bureau of Labor Statistics employment numbers.

The surprise: Nonfarm payrolls rose by 162,000 jobs, in line with forecasts for a big jump in temporary U.S. Census workers; but instead 114,000 of the gain were "real" jobs, and January and February were revised up to positive ground.

This is legitimate good news: At that pace the economy can at least absorb new entrants into the workforce — not enough to absorb the unemployed, but better.

Big print giveth, and fine print taketh away … one-third of the job gain was temp-help, and another 27,000 hired into the loopy, nonproductive health care Ponzi scheme. …CONTINUED

The companion survey of households found little improvement in anything, an additional 414,000 people joining the long-term unemployed in March alone, and "involuntary part-time" growing to 9.1 million.

The toughest single piece of fine print told the tale: Wages in March fell. Only 0.1 percent, but fell. Looking farther back: Job losses in recessions prior to 1990 were made good in 15-month V’s; the 1990 recession took 30 months, and the 2002 recession took 47; we are 27 months into this one, with job losses three times as large as the prior two, and might have bottomed. Might. Neither inflation nor recovery is made of such stuff.

Nor are good politics or public policy.

Long-run conclusions are inescapable. Beginning with the emergence of China circa 1990, American labor has come under fierce wage pressure. Two bubbles — stocks and housing — sheltered the economy for a time.

Today, there is no such shelter available, not in "job creation" programs or anything else. The American standard of living has and will modestly decline until we restore global competitiveness.

We will succeed and come out of this. No doubt at all. However, in the meantime, here in the happy quickening of spring, average citizens are angry at their predicament, at government, and at each other. Our politics for 200 years were based on dividing up the spoils of increasing wealth. (No other nation can imagine such good fortune!)

Today, the arithmetic of pie-shrinkage is deeply upsetting to us: If you want to keep all that you have, you must take from someone else. That is the root of all of this public anger, fragmentation and governmental dysfunction. We are not remotely conditioned to the shared sacrifice of our grandparents and parents.

There is no quick fix available, but in that knowledge, and in awareness of the deeply uneven sacrifices in our society, then understanding and patience are our most plentiful and least costly resources. (As sermons go, short is better.)

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com.


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