This time, we really mean it: A growing pile of positive economic reports says the recovery is speeding up.

So what’s this mean to us ordinary folk?

It’s a mixed message. If you’re job-hunting, your odds are probably getting better. If you’re shopping for a loan, better hurry. And if you’re thinking about pouring money into a fixed-income investment such as a bond fund, think again.

Consider the following:

Early this month, the Labor Department startled economists by reporting a strong gain of 308,000 jobs in March, the biggest monthly increase in four years.

On April 13, the government reported that retail sales jumped a surprising 1.8 percent in March. Excluding automobiles and gasoline, sales were 9 percent above the March 2003 level, a gain not seen since such records started being kept in the early 1990s.

On Wednesday, it said consumer prices rose 0.5 percent in March, with “core” inflation – excluding food and energy – gaining 0.4 percent, the biggest monthly gain since 2001.

Other reports have showed manufacturing and factory orders continuing to expand, while new unemployment claims remain low. The trade gap is getting narrower and housing starts surged 6.4 percent in March, the biggest gain in 10 months.

While there are a few contrary signs – dips in industrial production in March, probably caused by warm weather, for one – the economic news is, on balance, very good.

Why, then, isn’t everyone turning cartwheels? Stock investors are wringing their hands and bondholders are downright morose.

Here’s a rundown on how the changed circumstances may affect ordinary consumers and investors – all offered with the standard caution that nothing is ever certain.

-Stocks. Rising employment and higher wages allow consumers to buy more, which is good for producers, thus tending to push stock prices up.

But this can be offset by the fact that inflation forces producers to pay their employees and suppliers more. Rising interest rates cause them to pay more to borrow money, undercutting profits. And higher rates can eventually draw investors’ money away from stocks and into bonds, hurting stock prices.

It’s too soon to tell which side of the equation will have a stronger effect on stocks. That’s why stock prices have been stagnant since the start of the year.

Last year, stocks surged as investors bet on the recovery to come; now investors are focusing on what will happen next – and worrying about inflation and higher interest rates.

Long-term investors probably shouldn’t be too concerned, since stock returns historically outpace inflation and beat returns on bonds and savings accounts. But don’t tie money up in stocks if you’ll need it during the next five to 10 years.

-Bonds. The threat of inflation has bond traders in a tizzy because they expect the Federal Reserve to begin raising short-term interest rates to cool the economy to prevent inflation from getting out of hand.

When rates rise, the prices of bonds already in circulation fall. That’s because no one will bid $1,000 for an older bond paying 4 percent interest if the same amount will buy a new bond paying 5 percent. A rate increase of 1 percentage point can cause a long-term bond’s price to fall by 7, 8, even 10 percent.

In March, the 10-year U.S. Treasury note paid 3.7 percent. Last week, that soared to 4.4 percent, dragging bond prices down.

This is a hazard for fixed-income investors who like bonds and bond funds. If you’re sitting on a wad of cash, don’t throw it into long-term bonds or bond funds now. Keep it in bank savings, in short-term bonds or bond funds, or in money market funds.

Move into long-term bonds and funds only after you’re convinced rates have gone up about as much as they’re likely to. Then you’ll get the higher yields and enjoy the rise in bond prices that will come if rates subsequently fall.

-Loans. Thinking of taking out a new mortgage or other loan? Don’t wait too long, as rates are more likely to rise than to fall.

In fact, they are already. The average for the standard, 30-year, fixed-rate mortgage was 5.6 percent Friday, up about half a percentage point since late March, according to tracking service Bankrate.com.

A half-point rise lifts the monthly payment 31 cents for every $1,000 borrowed – from $5.43 to $5.74. That’s $31 for every $100,000.

At less than 6 percent, mortgages are still very affordable. Remember that it’s not at all uncommon for mortgages to charge 7, 8 or 9 percent.

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(Jeff Brown is a business columnist for The Philadelphia Inquirer. E-mail him at brownjphillynews.com.)

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(c) 2004, The Philadelphia Inquirer.

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