Friday's job report shows that White House economist Greg Mankiw was very nearly right when he projected almost a year ago that jobs could rise by 2.6 million in 2004. Of course, he was widely ridiculed inside Washington after making this statement, and at one point even the White House turned its back on the Harvard professor's estimate. But the Labor Department's latest employment release shows the yearly gain for nonfarm payrolls coming in at 2.3 million. That's close enough for government work. It's also the best jobs performance in five years.

Why so good? The labor market responded powerfully to lower personal tax rates. As workers were able to keep more of what they earned, the unemployment rate declined from 6.3 percent to 5.4 percent. A full 2.5 million jobs were added since August 2003. Mainstream economists continue to scoff at the economic power of lower marginal tax rates. But once again a supply-side experiment worked. For all of 2004, nonfarm job additions averaged just under 200,000 per month. At this rate, 2005 will be another banner year for employment and economic growth.

... it is possible that this year's unemployment rate could dip below 5 percent. Outside of the bubble economy of the late 1990s, this would mark the lowest unemployment rate since 1973. Declining unemployment also signifies lower federal spending on unemployment benefits and other small-scale entitlement payouts.

Additionally, at 5 percent or lower unemployment, the 4 percent growth rate of the economy will spur a flood of new individual tax collections at lower tax rates. Hence, another economic surprise of 2005 will be a pronounced decline in the federal budget deficit.... America's cowboy capitalism, to borrow Europe's derisive term, is hatching yet another economic boom.

More here

I guess this shows the effects of all that "outsourcing": "U.S. industrial output grew strongly last month while producer prices fell at the sharpest rate in 1-1/2 years amid tumbling energy prices, according to reports suggesting healthy, noninflationary growth".

Australia is doing well, too:

"Australia's remarkable run of economic growth is set to continue, with new hirings in December cutting unemployment to 5.1per cent, its lowest point in 28 years... Noting that interest rates are just above 5per cent, while inflation is just over 2per cent, Commsec chief economist Craig James said: "Without question, Australians are enjoying the best economic conditions since the late 1960s." Mr James said that with the 29,000 new jobs added last month, a record 60.1per cent of the population aged over 15 has a job. The fall in unemployment last month was felt around the country".

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