I used to live next door to a Russian émigré. One day he asked me to explain something that puzzled him about his new country. "This place seems very rich," he said, "but I never see anyone making anything. How does the country earn its money?"

The answer, these days, is that we make a living by selling each other houses. Since December 2000 employment in U.S. manufacturing has fallen 17 percent, but membership in the National Association of Realtors has risen 58 percent.

[P]eople are feeling insecure because they understand that today's economy is built on shaky fundamentals. Average Americans may not sit around fretting about America's outsized budget and trade deficits, and its unprecedented foreign indebtedness. But many of them - as buyers, borrowers and employees - are concerned about the increasingly bubbly housing sector.

The economy's shortcomings are nowhere more obvious than in the job market. Nearly four years into an economic expansion, job growth is still substantially slower than in previous recoveries. Wages for 80 percent of the work force are barely keeping pace with inflation, and aid for the workers hurt by global trade is paltry. Because Mr. Bush fails to acknowledge the lackluster job and wage growth, he fails to respond appropriately. The administration's insistence that the economy is getting better all the time - a stance that is based on statistical aggregates that are often divorced from individuals' actual experience - only intensifies the anxiety that people feel.

¶ 10:42 AM