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When the Public Says the Economy Isn't So Good, Perhaps That's Because It Isn't

The Washington Post had an interesting article today on how "Quality of New Jobs Is Focus of Election-Year Debate". In standard fashion, the article quotes statistics from both sides of the dispute and makes no attempt to sort out who has the stronger case.

Let me try and remedy that. The article cites an interesting study by CIBC World Markets that finds:

...U.S. job creation since late 2001 has been concentrated in low-paying industries such as hospitality, education and personal services, while job losses have hit higher-wage sectors such as transportation, manufacturing, utilities and natural resources.....The message is clear: The vast majority of the jobs that evaporated during the job-loss recovery were high-quality jobs.

The Republican reply to this kind of claim is to say that many high-wage industries are now growing and adding workers. That's true, but even if such industries are now adding workers, if they are growing slower than the average industry--which turns out to be the case--their share of overall employment will continue to decline and the employment share of low-wage industries will continue to rise.

Score one for the Democrats.

The article also quotes Stephen Roach, chief economist of Morgan Stanley, on the nature of wage growth in this recovery:

Despite the well-advertised pick-up of job growth, recent trends in real wage income remain very disappointing. This, in my view, underscores one of the most serious shortcomings of this recovery -- an unprecedented shortfall of the most important piece of personal income growth, wages and salaries.

Democrats support that view, pointing out that "[a]fter adjusting for inflation, average weekly earnings fell 0.4 percent last month and 0.5 percent in the 12-month period." In other words, real weekly earnings are declining, not rising.

The Republican counter to this is to say that "[a]verage hourly earnings, adjusted for inflation, have risen 2.4 percent since Bush took office". But most of that gain took place in the period immediately after Bush took office, before the recession really started to bite. In the current period, real hourly earnings, just like real weekly earnings, are headed downwards. According to economist Jared Bernstein at the Economic Policy Institute, real average hourly earnings declined .3 percent last month and are down a full percent in the last six months, which includes, of course, all the months of good job growth touted by the GOP.

Score another for the Democrats. And that's even without mentioning the benefits aspect of job quality trends, as health care costs continue to soar and the availability and stability of coverage continue to decline. Or the inequality of what little wage growth there has been over the last three years. Or rising prices, especially for gas.

The most compelling hypothesis about why voters are not happy with the Bush economy remains the simplest: it's not that good. In fact, it's still pretty bad. Trust the people: they know what they're experiencing.

Just as they did in the 1990's. Bill Clinton's administration presided over the creation of stunning numbers of jobs (2.8 million in 1993, 3.9 million in 1994 and another 2.2 million in 1995) before the labor market truly tightened in early 1996, real wages started surging and Clinton finally reaped the political benefits of economic optimism. Check out these month-by-month numbers (in thousands) for job creation from 1994 alone, more than a year before the public turned optimistic: 270, 192, 468, 357, 339, 310, 359, 303, 354, 206, 425, 270. Wow. And the Bushies think there should be a tidal wave of economic optimism because there's (finally) been three lousy months of good job growth.

That's what they call chutzpah. And, as they used to say in Papa Bush's day, being out of touch. Way out of touch.

Comments

As I said below, if the average consumer doesn't have the solvency to consume, things go south real fast.

PS: K-12 Education SHOULD be a high-paying job dammit!!!

The Bush camp, as usual, is expecting news reports on a recovering economy and spin to sway voters on their opinion on the economy. Which, in the case of jobs and wages, is mind-bogglingly stupid. It's really emblematic of this administration. They believe everything is spinnable. And a lot of things are. But people know if they have jobs, can get jobs, are getting raises, their jobs are threatened, etc.

I don't doubt that the economy is finally improving and that, eventually, we'll see the improvement in the things that matter to voters. It won't happen by November, though. Touting the improving economy is a losing proposition for Bush.

Keith,
I am not so sure that the economy is all that secure. Remember that this 'recovery' was (poorly) buttressed by enormous fiscal policy measures and we now have projections of debt that are mind boggling. With the Current account the way it is, if the employment numbers continue to improve, what is going to happen to inflation? What about Interest rates?
It is, of course, very possible we could ride through this, but there are a lot of big imbalances in the economy (mostly the result of unbelievably bad targetting of fiscal policy), and it is hard to know what will occur when these are brought back into balance (Regional housing bubble collapse, Interest Bubble collapse effecting different sectors very differently).
The economy will not be out of the woods until the markets can trust that economic policy is being set by grownups -- that is 6 moths to 4 years and 6 months away.
It really is a shame that we shot the surplus, because with the productivity numbers we have had the last 4 years, we should have expected an even bigger boom than the late nineties in economic activity.

Oh, I agree that there are some monster chickens coming home to roost. But I don't think that'll happen for a while, yet. In the medium term, the economy seems to be picking up. And, by the way, I consider the stock market to be a very bad indicator of general economic conditions. The market is good at predicting what's good and bad for the market, not necessarily the economy as a whole. The market won't like inflation, because the Fed will put on the brakes in a hurry, as they've said, but in my opinion, some inflation is actually a very good sign that the improving economy is actually filtering down into the places that matter (wages), although energy prices complicate this quite a bit. As to the astonishing productivity numbers, I'm still an agonstic on those—I believe that they're at least partly an artifact of various measurement errors along with, significantly, the fallout of the tech bubble collapse. But I'm no economist. :)

Mimiru, I absolutely agree with you on how elementary school teachers should be paid well. I take it even further. I hear parents complain about the quality of the teachers (they never seem to notice that their kids have no attention span or spend most of their time watching television), and these same parents spend a fortune on watching and celebrating professional athletes. How is it even possible that a guy gets a 250 million dollar contract with the Yankees and that's okay but a teacher getting a 3% cost of living adjustment isn't?

I say, let pro athletes get paid ten percent of what they get now (a 25 million dollar contract isn't enough?), let the owners get ten percent of what they get now, and take the extra money and use it to pay teachers. I'm normally very pro-capitalism, but I am very anti-pro sports. Values-wise, these guys teach awful values. Entertainment-wise, well it's boring as hell to me, but that's just me. But I figure if it costs a family of four $300 just to buy seats at a basketball game, let $270 of it go to the schools.

I agree with the article. However, the 90s economic boom was not without its problems. Yes, more jobs were created. Many people fared well during this time but there were just as many people who lived paycheck to paycheck as usual; worked two part time jobs to equal one; did contract work with no benefits; etc. Also, no one talks about the Democratic President Clinton who led the fight for NAFTA. Where are all these good paying NAFTA jobs that were promised? Since the late 70s/early 80s, jobs in the manufacturing sector were leaving US shores. We didn't need a NAFTA to help this process even more. I challenge Democratic supporters to keep the job issue alive - force Kerry to address the problem with viable, real ideas for job creation and for providing incentives and or penalties to those companies that continue to offshore jobs in their search for the lowest wage. I am tired of rhetoric from both parties; if either wants my vote, they must come up with definite plans to improve the economy.

if even economists and executives (those who have secure, well-paying jobs) can see past the spin and recognize the poor economy, might professionals turn from Bush and the GOP as well?

check that, not professionals (already democratic) , but will MANAGERS finally realize that Bush and the ideological right is leading this country astray??

To me, it's simply bizarre to believe that we should be filled with optimism because the job creation numbers are looking up. The basic reality is that, on net, jobs have been lost under the Bush administration over the space of 4 long years. 4 years in any economy should be well more than enough for temporary blips to work themselves out, and for a long term trend of growth to overwhelm the "noise" of a recession. That one has to go back to Herbert Hoover and the Great Depression to find a counterexample makes this point as plain as day.

If there's been a net loss of jobs over 4 years, while, of course, the population has simultaneously been expanding for four years, then things just HAVE to be bleak on the job market -- all kinds of people have to be wanting jobs who can't find them if this basic statistic holds up, whatever the unemployment rate may say.

And why should anyone believe that the current trend of job growth will continue long enough to get us out of this rut?

The Bush economy has been cursed with a thousand false dawns. Why should anyone believe that this is not still another?

A couple of weeks ago I read an AP story that was lamenting the fact that people were not giving Bush credit for the improving labor market. The reporter was essentially twisting arms, telling one Ohio woman, an undecided republican who had the impression that jobs were stagnant, that actually jobs were being created. She responded "oh, well OK I guess I'll vote for Bush then". Another woman said essentially what Ruy says here, that the jobs being created were low paying jobs at mcdonald's. The reporter said she refused to change her opinion of Bush despite being told she was wrong about the economy. Talk about chutzpah. The point is the media is working hard to prop up the Bush campaign's rosy scenario. Any perspective on historical economic recoveries is missing. The only question seems to be why aren't these misinformed people seeing things their way?

The job numbers everyone is talking about are not entirely accurate. The administration has been using a new(?) computer model (Net Birth/Death Rate Model) to calculate new jobs created from new businesses. It's adjusted once per year in February, so the numbers that are thrown at us as actual numbers each month won't be adjusted until next February. To give you an example, of the 1.2 million jobs created since April 2003, 1.1 million of these jobs were "estimates" by this computer model. In essence, only 122 thousand jobs have been created since April 2003 that are truly traceable jobs reported. The rest are bogus until next February. The number could go up or could go down. This model traces new companies created going back five years (that includes the last three Clinton years when over 8 million jobs were created) and uses those statistics along with Bushe's first two years of job losses to come up with a number of new (estimated) jobs from new (estimated) businesses. The Bureau of Labor Statistics even states that the model is unreliable in economic turns (good years of Clinton, bad years of Bush). It makes great press, but is totally a lie.

frankly0, I think the argument is in two parts: economy over the course of Bush's term, and economy during the election year. Lichtman's Keys to the Presidency says these are separate judgments for voters, and there's history to back him up -- Reagan had lousy growth for the term in general, but a boom during election year bailed him out; Carter, by contrast, had better overall growth but an election year recession hobbled him. Clinton is one of few to have both going the right direction.

The long-term record is clearly a debit for Bush, and voters have processed that -- coupled with the Iraq fiasco, I think it could be enough to beat him regardless of the current direction of the economy. But it is amazing to find that people are not even accepting the short-term as a clear positive, despite the surface-strong statistics and concurrent media cheerleading. It may be that the experience of the past few years, the inequity of benefits gained from the recovery, and the fear (linked to gas prices) that such recovery as we've had is now past is persuading people to hold off on changing the administration's grade.

Did anybody see USA Today this morning? The guy who does the economic model -- which, going strictly on short-term trends, predicts a 58% Bush win -- just about explicitly disowned his own prediction.

Well dean, as a hardcore baseball fan I'd cut off my limbs for the sport. :) But baseball's vast uptick in salaries only began in the last 10-15 years. You point to A-Rod contract and Manny's but except for those two, salaries have gone down from that and they are represented by that walking pestilence Scott Bora$. I think eventually the mechanism will self-correct, however remember that Baseball gets special dispensation so that anti-trust legislation cannot be brought against it. Finally, it costs $8 for a ticket to a ballgame. That's chump change really, but of course, all the other sports charge obscene ammounts. Baseball is the last really affordable sport to see in person.

Also, when I was a small Mimiru, my parents had cable and I watched TV all the time! I was proud to call myself a TV addict and could tell time by what show was on an where it was in the show and it certainly didn't affect my GPA negatively.

That said, teachers should get paid more, but your singling pro-sports out to pay for it is rather extreme for me.

I knew I would get resistance on that one. I still think it's a good idea. Kind of a marxist one in many ways, but good in a social engineering kind of way.

Of course market forces are what have created the salary leaps. And no, I don't buy the "last 10-15 years" thing. Try since, what was it, 1976 when Catfish Hunter got his free agency from the A's and Steinbrenner bought him for something in the neighborhood of 3.5 million? I don't recall the exact numbers on all this. I haven't given my attention to pro sports for a long time, but I recall hearing about 7 years ago about some kid who was drafted for the NBS and holding out. The team wanted to give him 113 million but he (or his agent) felt he deserved 127 million. And that was before he had played a single minute for the NBA.

I'm not proposing that pro players be empoverished. Hell, pay them 400,000 a year. But 10 million a year? And keep the owners' revenues in the same lower neighborhood. For crying out loud, it's a bunch of guys in funny clothes playing games. Contrast that with the work done by the man or woman who watches, educates, and nurtures your child every day for the better part of the year. Tell me who deserves better pay, better work conditions, greater respect.

And regardless of what you think of the idea to lower pro sports salaries, please don't complain when your property taxes get raised to pay for the school system. I don't even have children and I will never have children, but I regard a strong education system as essential to the well-being of the country and the greatest factor in the historical US dominance in world economic markets. I don't mean the Harvard MBAs, either.

However, if you do feel the need to complain when property taxes go up, give my idea about pro sports a thought or two. It might not fund everything, but it would be a help.

The economy has been undergoing a fundamental restructuring for well over a decade. Beverly complains about NAFTA, but it is more or less a wash. What is very clear is that Clinton and his economic team of Rubin, Summers, Sperling and others guided our economy with sound policies through some potentially rough waters. The trick is to have the economy continue to create new jobs, at a rapid rate because the forces of technology are driving both productivity increases that cause job loss/displacement.

Mr Bush failed to appreciate how good Clinton policies actually were and reversed course. Shutting down immigration and stifling globalization has been a drag on our economy. How many tech firms are owned by Chinese or Indians? If we don't let them in to do business here, they will do business at home. Mr Bush and his advisors are stuck on a model of an old economy that no longer exists.

Mr Bush has tried to be the unClinton. Unfortunately, most of us are discovering how good Clinton policies actually were and how bad the alternatives can be.

The economy has shown slight improvement because of the Fed's reckless policy of funny money flooding the economy - not the tax cuts. And jobs are not going to return. Plants would have to be built. What is being built now are distribution centers for WalMart, Target, and Dollar. The service economy is here based on people selling things to each other. And it is going to flop. I've watched the downfall of electronic manufacturing over the past 20 years. I am now in SC where the textile mills are shutting down. The equipment is being shipped to China.
In the past, Greenspan has used increasing wages as the marker to raise rates. This time, he may slam on the brakes before we have a chance to get jobs let alone ones that pay a decent wage.
Giving communist China PMFN was wrong and the result of business money going to congress. Why reward them for Tienanman square? And yet the Cuban-American PAC keeps us from dealing with Cuba? Give me a break!
Either way, I don't see how we're going to get out of this mess without a real leader. Can Kerry do it? Doubtful but for now, he looks better than Bush and for him, that is what counts. We really need a good strong third party that will take the country back to the intentions of the founders of this country - a very limited Republic that does very little and gives everyone liberty. That is why this country is heading in the wrong direction.

I think I remember reading in the LA Times that a CA organization that collects labor statistics reflecting Mexican employment generally supported the concept of job growth. However, almost all the growth was in low wage jobs, over one quarter filled by immigrants. They have no yardstick, but surmised that a big chunk of those jobs went to Mexican illegal immigrants, based on ratios suggested by small samples.

There are estimates of the illegal boarder crossings to our South of something like 2 million in the past 12 months. Most looking for those "jobs"