Economy Roars, Why Don't Americans Feel It?

May 31, 2006 — -- President Bush's new pick to steer the nation's economy will take the job at a time of strong growth and low unemployment, but he'll still have his work cut out for him.

The nomination of Goldman Sachs' chairman Henry Paulson to replace Treasury Secretary John Snow is seen by many as a way for Bush to woo back Americans who are feeling down and out about the economy.

A new ABC News poll finds 60 percent of Americans disapprove of the president's handling of the economy. Just 38 percent approve. Still, Bush has sounded confident about the U.S. economy.

"When he's confirmed by the Senate, Hank [Paulson] will build on John's fine work. He takes this new post at a hopeful time for American businesses and workers," Bush said.

"In the first quarter of 2006, the U.S. economy grew at an annual rate of 5.3 percent, the fastest growth in 2.5 years. We added 5.2 million new jobs since August of 2003. The national unemployment rate is down to 4.7 percent. Productivity is high, and that's leading to higher wages and a higher standard of living for the American people."

Strong Economy, Whether or Not You Feel It

"Although it does not always feel like it, the economy is doing well," said "Good Morning America" financial contributor Mellody Hobson.

She points out unemployment is low, the stock market is at near-record levels, and the economy is growing at a brisk pace. Additionally, interest rates are still low compared to historic levels.

Gas Prices Spoil the Party

Hobson believes that Americans' less rosy outlook on the economy is linked to high gas prices.

"American consumers are strapped right now," she said. "They are grappling with high levels of home equity and credit card debt, and are now even further on the ropes because of the high price of gasoline."

The ongoing pain at the pump has left the public with less buying power. "The U.S. consumer is starting to cry uncle," Hobson said.

Tapping a Wall Street 'Rock Star'

The discrepancy between the economic data and public's mood may have affected Bush's decision to name a new treasury secretary -- his third since taking office in 2001. Hobson likens Paulson to a Wall Street "rock star."

"He's akin to the Bill Gates of the financial services world," she said.

"He heads a company that last year had $43 billion in revenue and employs 31,000 people so he's used to heading a very large company in a very complicated industry."

Hobson says Paulson's experience in government early in his career makes him familiar with the public sector.

"After graduating from business school in 1970, he was a staff assistant to the assistant secretary of defense at the Pentagon from 1970-1972, and then he became a member of the White House domestic counsel serving as a staff assistant to President Richard Nixon from 1972-1973," she said.

Overall, Hobson believes that Paulson's array of credentials could be very helpful to the U.S. economy.

"His broad knowledge base, depth of experience, and strong relationships with the White House should serve him well in the role of secretary of treasury."

Regardless of the new boss at the Treasury, Hobson believes the red-hot stock market is due for a downturn.

"We are now in the longest stretch in stock market history where we have not had a correction (when a market drops by 10 percent.)"

In Hobson's opinion, the recent drop in the market since the beginning of the month may mean it's a good time to buy underpriced stocks.