By John W. Schoen Senior producer
msnbc.com
updated 2/2/2007 8:46:59 AM ET 2007-02-02T13:46:59

Friday's employment report - showing weaker-than-expected job growth in January - threw a bit of cold water on an otherwise upbeat week of economic data. The latest figures showed that just 111,000 new jobs were added for the month - a decent showing but a sign that the economy may be slowing. The unemployment rate edged up a notch - to 4.6 percent. Wage gains were meager.

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But a week of otherwise upbeat economic numbers has the White House busy reminding the nation, despite the bad news coming out of Iraq, that life is good for most Americans on the home front. Despite some signs of a slowdown, the the economy is humming along at a healthy clip. Low inflation and a strong job market have left most households in relatively good financial shape.

Still, the positive impact of that economic growth —  and the resulting prosperity it has brought to many — is not being shared by all Americans, especially among middle-income workers. President Bush acknowledged as much this week, as the new Democratic Congress has seized on this economic insecurity as a key issue in its agenda. Though the latest data on the overall economy is upbeat, many Americans say they care more about jobs lost to overseas outsourcing and a slide in the standard of living of middle-income workers. According to one recent poll, only 38 percent believed that their income will rise enough over the next 10 years to improve their standard of living.

Most of the recent data show U.S. economy has been positive, despite worries that a steep housing slump could drag the overall economy with it. Though the hangover from a post-Millennial housing boom continues, U.S. Gross Domestic Product rose by a stronger-than-expected 3.5 percent in the last quarter of 2006. Despite that growth, inflation remains tame enough that the Federal Reserve’s Open Market Committee said Wednesday it would hold interest rates steady. While still worried about inflation, the Fed pointed to "some tentative signs of stabilization ... in the housing market." All of which helped calm concerns about a weakening economy and helped push stock prices to record highs.

Bush, in a speech Wednesday just steps away from the New York Stock Exchange, where he was later greeted like a rock star on the exchange floor, used the stock market’s endorsement of his economic policies to remind Americans of the prosperity the White House maintains its policies have brought.

But the president tempered his upbeat outlook, acknowledging that the market’s bullish mood is not shared by all.

“By and large, our dynamic and innovative economy has helped Americans live better and more comfortable lives,” he said. “Yet the same dynamism that is driving economic growth is also — can be unsettling for people. For many Americans, change means having to find a new job, or to deal with a new boss after a merger, or to go back to school to learn new skills for a new career.”

Much of the concern of those displaced workers centers on the loss of jobs to overseas markets, especially in manufacturing. Bush has said that stemming that job outflow with trade barriers would only hurt the nation’s overall prosperity.

The White House also argues that the growth of U.S. service jobs is a sign of strength, not weakness, in the manufacturing sector. As of 1950, some 14 million manufacturing workers produced about $250 billion worth of goods each year; today, about the same number of workers produces five times that amount, according to Edward Lazear, the White House’s chief economist.

“That happened because productivity growth in manufacturing was so pronounced,” he told CNBC Thursday. “That allowed workers to move into these high-demand service sectors like education, like health, like financial services — all which are high-paid sectors. It was actually the strength of manufacturing that allowed that to happen.”

But millions of blue-collar workers have been unable to make that transition to a higher-paying job. Part of the reason maybe that federal spending on training and other job programs has fallen from $63 per worker in 1986 to only $35 per worker in 2006, according to the Economic Policy Institute.

Whatever the cause, the result is a widening gap between the richest American and the average worker, even with a strong job market.

“The top 20 percent is doing fairly well, and the bottom 20 percent is doing better,” said David Wyss, chief economist at Standard & Poor's in New York. “If there's a hole, it's in the middle, which frankly are those old blue-collar jobs that the Democrats say are leaving the country. And they're right."

Some help is on the way. A push by Democrats to raise the minimum wage, coupled with a tax break for small businesses to satisfy Republican opponents, appears to have a good chance of becoming law.

Still, while the overall U.S. economy is growing, large sections of it continue to undergo wrenching change. Even as new companies, technologies and industries create new jobs, widespread layoffs are hitting older, long-standing employers like auto makers and their parts suppliers. Though the pace of layoffs in January was lower than a year before, it’s “too early to tell if these trends will continue as the year proceeds," said outplacement firm Challenger, Gray & Christmas said in a recent report.

"Additionally, many experts feel that the housing market has not hit bottom, so manufacturers of home-building materials, and the real estate and construction sectors could see more job cutting this year," the report added.

Despite the recent upbeat data, some economists suggest there is a risk that the much hoped for “soft landing” — a slowing economy that avoids recession — could stray off course. Part of the GDP's strength, the fourth quarter, for example, came from a one-time boost from warmer-than-usual weather and a big drop in energy prices, according to Richard Iley, a senior economist with BNP Paribas.

“You take those two factors out, underlying the fundamentals, the economy is pretty poor,” he said. “The housing correction has a long way to run and there will be increasing spillovers.”

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