WASHINGTON – President Bush (search) has been figuratively beaten about the head by opponents blaming him for the nation's weak economy. But new economic reports appear to be just the right medicine.
On Friday, the government announced that disposable income, or take-home pay, jumped 1.5 percent in the month of July, almost four times the increase of the previous month and an indication that the latest reduction in taxes left more money in people's paychecks.
Far from burn a hole in consumers' pockets, people went right out and spent the extra coin, pushing consumer spending up in a 0.8 percent jump — part of a steady increase that has been the one bright spot in the economy.
"We've been waiting a long time. It's almost like we've been waiting to exhale in this economy for the last three years and finally a lot of things are coming together at the same time," said David Kelly, an economic adviser for Putnam Investments (search).
Consumer spending accounts for about two-thirds of all economic activity and as tax cuts make their way into people's pockets, Kelly said he expects the economy to start picking up speed.
"This is a big tax cut. It is a lot of economic stimulus, but this economy is like a big engine and you have to give it a lot of gas to get it going. So I think it's absolutely right to run big deficits and have big tax cuts right now to get this economy firing on all four cylinders," he said.
Low interest rates have also helped, fueling home mortgage refinancings and the sale of new homes and automobiles.
But wary businesses have yet to start hiring more workers, though President Bush, who met with his economic advisers at his ranch in Crawford, Texas (search) earlier this month, is convinced the jobs will come.
"We feel like the tax relief plans we have passed will be robust enough to create the conditions necessary for economic growth and therefore people will find a job," Bush said.
In fact, the president's political future may depend on it. Democrats running for the presidency would like to argue that the economy has suffered a net loss of jobs under Bush, and by all accounts they will be able to do so. But Bush will likely be able to argue back that the economy is headed in the right direction.
This week, analysts revised up its number for economic growth to 3.1 percent in the second quarter of this year. That number happens to be the break-even point on unemployment. Growth above that level creates jobs, below that level loses jobs.
"We should begin to see a lift off in job growth in the next few months if we keep up this pace of economic growth," Kelly said.
If the economy were to grow at 4 percent or so over the next year, as some analysts believe it will, that could create 1.5 million new jobs, not quite half the number lost since Bush took office, and enough for him to claim his economic growth package is paying off.
Fox News' Jim Angle contributed to this report.