The economy -- from 'soft patch' to 'rough patch'

In recent months, happy talk, and nothing but happy talk, has been the order of the day when economists talk about the future of the economy.

Oil at $50 a barrel? The Fed raising interest rates? Terrorism fears abounding, with no end in sight? Why, that must mean the economy is set to accelerate, most economists -- including those at the Fed -- said, with GDP growth jumping to 4 percent in the third quarter and probably higher in the fourth quarter, and with job growth to return to 1990s-style monthly gains of 200,000 or more.

It's almost as if Wall Street economists -- and the Fed -- have been taking a page from the Bush administration's Iraq playbook: keep saying everything's fine, despite all evidence to the contrary.

But at some point, evidence begins to pile up, and it becomes impossible for all but the most pig-headed economists -- here's looking at you, Brian Wesbury, Joe LaVorgna and David Malpass -- to ignore.

Such was the case with the numbers for September job growth.

They were, as usual, weaker than expected. They were actually somewhat stronger than I'd expected -- I was guessing closer to 50,000, while Rich Yamarone was calling for an outright decline -- but economists across the board recognized their weakness.

In fact, the gloomy talk from economists Friday morning seemed out of sync with the severity of the jobs report -- it wasn't that bad. But, of course, when you've been having sunshine blown up your ass for months on end, the slightest bad news feels like a horrible, horrible disappointment, indeed.

That's the reason I chose a long time ago to be a pessimist about pretty much everything -- that way, I'm more often pleasantly surprised, rather than crushingly disappointed. As a Braves fan, this approach has served me well.

In any event, business leaders don't have time for hopeful talk -- they have to worry about the bottom line, and they're not liking what they're seeing, according to a recent survey by the Business Council, a group of U.S. CEOs. Seventy percent of them see GDP growth of about 2 percent in 2005 -- well below the trend rate -- even as they expect oil prices to retreat to $40 a barrel.

"Doesn't Mr. Greenspan talk to these guys?" asked David Rosenberg, who has been one of the lone voices in the wilderness expressing caution. He goes on to say:

"The result sure dovetails with what the Fed staffers told us in the latest Beige Book. Bloomberg News quotes an economist saying 'I don't see how we get to 2 per cent.' These guys actually produce GDP; all we do is forecast it."

Indeed -- and not very well, at that.