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Good news about the economy doesn't show up in labor stats

As more work shifts to part-time and off-site, unemployment rates may appear to be too high.

It was the worst of times, it was the best of times – this reversal of Charles Dickens' famous line at the opening of "A Tale of Two Cities" could well characterize the U.S. economy in 2011.

If one reads the recent national press or listens to the economic pundits, the economic news is not good. Three weeks ago, Time Magazine had a cover story titled "Five Myths about the American Economy." The story painted a bleak picture of the current economy and the persistence of unemployment in the 9 percent range. The latest monthly jobs creation report was discouragingly anemic. Talking heads are on the case of the U.S. economy, and what they have had to say is not encouraging.

And yet, what I experience in my travels across the country tells another story. I work with a private equity group out of San Francisco that acquires mid-size, engineering-driven manufacturing companies – all based in the United States. All of these companies are having record or near-record years in 2011. In most cases, these companies are on track to eclipse their performance in 2008 – the top of the housing-fueled U.S. economic bubble.

Admittedly this is a small sample, but I believe it is representative of the slice of U.S. manufacturing that provides higher value products. Moreover, the overall economy is growing at a rate close to 3 percent, which has been roughly its long-term trend. Ben Bernanke, the chairman of the Federal Reserve, said in a recent speech that he expects the U.S. economy will grow even more strongly in the second half of the year.

How does one explain this apparent contradiction between some economic indicators that are positive and the comments dominating the press, which are mostly negative?

Several factors are at play here. First is the tendency of the media to overreact to the latest bit of information. The low monthly job creation report fueled, to my mind, a vast overreaction without much sense of the longer-term indicators – most of which are positive.

More fundamental is the lack of much historic perspective on the nature of the economic collapse of 2009. The country suffered a financial meltdown that was, in many ways, more severe than the Great Depression.

Only extraordinary leadership from Treasury secretaries Henry Paulson in the outgoing Bush administration and Timothy Geithner for the Obama administration prevented the world economy from experiencing catastrophic failure. As one financial expert said, we were within days of ATMs simply shutting down. Think about that for a moment.

Given this backdrop, the recovery of the U.S. economy has been extraordinary. We lost a net of 7 million jobs over this period, but the U.S. economy in 2008 was based on such an artificial level of spending, particularly in the housing market, that significant restructuring was inevitable and imperative.

Which gets us to the heart of the current problem: the "stickiness " of unemployment figures. Historically, unemployment in the 5 percent to 6 percent range was an indicator of a healthy U.S. economy. Current 9 percent unemployment is in a range that has long been viewed as politically unacceptable. However, government's role in jobs creation is at best indirect.

The few short-term actions government might do to spur jobs growth, like funding "shovel-ready" public works projects or offering "cash for clunkers," have run up against the constraints of a burgeoning federal deficit.

The plain fact is that we Americans may simply have to get used to higher levels of unemployment or of underemployment than we have in the past.

The American economy is restructuring to adapt to a much more competitive global economy. Earlier this month the McKinsey Global Institute, the highly regarded public policy arm of the eponymous management consulting firm, released a report entitled "An Economy that Works: Job Creation and America's Future."

One of the most telling findings of the report is that American employers are rapidly moving to a more flexible and a more virtual U.S. work force.

According to McKinsey data, almost 60 percent of U.S. employers say they will shift more work to part-time, temporary or contract workers over the next five years. In addition, 25 percent of employers will shift more work to telecommuting, and more than 20 percent will use more offshore or outsourced workers.

All of this is not necessarily bad news for U.S. workers. There will be more opportunity, but it may mean piecing together part-time or contract opportunities. This is likely to mean longer periods of relatively high unemployment or underemployment.

What all this means for the 2012 election remains to be seen, but President Obama is right to be worried – and there is little he can do about it.