Analysis: Good economic news something of a mirage

Borrowing radio broadcaster Paul Harvey's signature saying: let's hear the rest of the story.

Some seemingly good economic numbers can be something of a mirage masking weaknesses in the national economy.

Let's take the unemployment rate, which dipped to 5 percent in April, from 5.1 percent in March. A closer look reveals that the decline in unemployment is not as good as it looks at first blush. The drop came as the number of people holding part-time jobs for economic reasons swelled to 5.2 million in April, up sharply from 4.4 million a year earlier.

The dip in the unemployment rate also occurred as employers cut jobs for the fourth month in a row, pushing up total losses beyond the quarter-million mark -to 260,000. Wages barely grew and workers' hours were trimmed. Taken altogether, these things point to a tepid picture of employment conditions nationwide.

Federal Reserve Chairman Ben Bernanke and his colleagues recently used the word "softened" to describe the labor situation.

U.S. productivity -an important ingredient to the country's long-term vitality -grew solidly in the first three months of this year. That efficiency gain, however, came at the expense of workers.

"Productivity gains were due primarily to declines in hours worked," the Labor Department's Bureau of Labor Statistics explained. Those hours fell at a 1.8 percent pace, the biggest drop in five years. Employers also shed workers in the first quarter. Thus, companies were able to produce more with fewer workers, and that boosted productivity, the amount an employee produces for every hour of work.

"American workers, you just got to love them," said Joel Naroff, president of Naroff Economic Advisers. "They just seem to produce more and more and more. That was the case in the first quarter of the year as fewer workers working fewer hours managed to produce more," he said.

Still, healthy efficiency gains are important for the economy because they can blunt inflation; that's good for companies' profits and good for those earning paychecks.