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About That "Booming" Economy

I have devoted some effort to debunking the administration's claims of a booming economy and the deplorable tendency of the press to fall into line and parrot these claims without putting them into context. Now here comes the new jobs report which should tax the ability of the administration and the press to claim the economy is going like gangbusters.

Here are the key findings:

1. The economy only added 112,000 jobs in June, well below expectations and far short of the numbers generated in the last three months (which, incidentally, were revised downward slightly). As Representative Pete Stark (D-Calif) correctly points out: "Despite 10 months of job growth, there are still 1.1 million fewer non-farm payroll jobs than there were when President Bush took office. There are 1.8 million fewer private payroll jobs, including 2.7 million fewer manufacturing jobs".

2. Manufacturing employement contracted by 11,000 jobs, ending a short spurt of job growth in that sector.

3. Average hourly wages went up only .1 percent in nominal terms last month. That means real wages (wages adjusted for inflation) almost certainly went down last month--again. As EPI's Job Picture points out, that means "real hourly earnings will be down in real terms over the past year, and will have fallen in six of the past seven months". In fact, as a recent EPI Economic Snapshot observes, real wages are now the lowest they've been in two years.

But what does President Bush have to say? You guessed it: "...the economy is strong and getting stronger". Trouble for him is, voters, living as they do in the real economy, don't agree.

The recent NBC News poll asked voters how strongly they agreed, on a five point scale where 5 is totally agree and 1 is totally disagree, with the following statement, which is, almost verbatim, the standard Bush riff on the economy:

Our economy is strong and it is getting stronger. America has added more than one-point-four million new jobs since last August. The rate of home ownership in America is at an all-time high, business investment is growing, the stock market is improving, consumer confidence is increasing, and personal incomes are on the rise.

Just 16 percent gave it a "5" (totally agree) and another 19 percent gave it a "4". Not so good. And here's the other statement NBC News gave to voters, which sounds like it came out of a Kerry speech:

The net loss of one-point-two million private-sector jobs is a serious challenge for the American economy. Middle-class families are also increasingly being squeezed by the rising costs of health care, college tuition, and gasoline at the same time that wages and incomes are stagnating and personal bankruptcies are at a record high.

This one sounded way more plausible to voters--46 percent gave it a "5" and another 19 percent a "4".

And you know what?--it not only sounds more plausible, it is more plausible. Let's hope this latest jobs report wakes up the press to that reality.

Comments

I agree with Ruy's comments.

The bad economy is particularly visible when one compares job gains to population gains.


1) The index of Aggregate hours worked fell by 0.6 percent. This June number implies that there has been essentially no change in aggregate hours worked by employees since March 2004 and since 2002. Aggregate hours worked in manufacturing rose only 0.2 percent since March 2004. Aggregate hours in manufacturing are still more than 5% below their level in 2002 (Table B-5).

2) Recent Job growth is barely keeping pace with population growth. The HH survey's employment population ratio was above 64 percent in 1998, 1999 and 2000. It fell to 62.3 in 2003 and that is also it's level in June 2004. The unemployment rate has been constant since January 2004. (Table A-1) Just to get back to an E/P ratio of 64%, the economy would need to add 3,780,000 jobs.

3) From May to June 2004, The seasonally adjusted Weekly earnings of non-supervisory workers fell by $2.45 or about 0.5 percent (table B-3). This decline in nominal weekly wages came on top of a 0.2 to 0.4 percent rise in the cost of living. There is no disconnect between workers perceptions and the "reality" of an improving economy. Workers real weekly earnings fell by nearly one percent in June 2004. Their pay check's buying power is declining.

4) Hours worked per week by non-supervisory workers has declined over the last year. Combined with the decline in the inflation adjusted hourly wage, the result is a declining pay check in real terms.The stability of aggregate hours worked since March implies that the increase in employment since March was accomplished by cutting back on the weekly hours of existing workers..

5) Occupations that are most subject to foreign competition and off shoring are still suffering despite the large reduction in the value of the dollar that should have improved the competitiveness of American workers. Household survey data implies that Employment of production workers fell 4.4% from June 2003 to June 2004 and office and administrative support occupations employment fell by 0.7 percent. Fast growing occupational categories were Construction (6%), Transportation and materials moving occupations (5.4%) and Installation and maintenance and repair occupations (3.5%). These are types of work that must be performed in the US (Table A-10)

6) The occupational up skilling of the employed work force has slowed. During the last year up skilling stopped. Over the last two decades professional, technical and managerial jobs (which account for 34 percent of all jobs) have accounted for about two-thirds of job growth. During the last 12 months, these high skill occupations accounted for only 22 percent of net job growth (Table A-10). Their share of total employment fell.

6) Industry payroll data from the establishment survey are consistent with this picture. Over the past 12 months, The fast growing industries were mining (2.9%), construction (2.8%), Janitorial services (3.4%), Temporary help agencies (10.3%), education and health services (2.1%) and Hotels and restaurants (2.4%). The Declining industries were manufacturing (-1.0%) and information and communications (-0.5%).


7) College grads have suffered along with everyone else. The employment to population ratio of college graduates was above 77 percent in 2000 and the first two quarters of 2001. The seasonally adjusted Emp/Pop for college grads had fallen to 75.3% in April 2004, 75.2% in May 2004 and 75.7% in June 2004. The E/P average for the second quarter of 2004 is 3.2 percent below its level in the first quarter of 2001. If we were to return to the first quarter of 2001 college grad E/P ratio, 1,250,000 extra college graduate would be employed. That is roughly equal to the number of bachelors degrees annually awarded by the nation's colleges and universities (Table A-4)

Sobering. Very sobering.

When it comes to something like the economy, the public's perception comes mostly from their actual experience. We shouldn't worry about Bush and the press hyping it, and by the same token there is no point in trying to play it down.

Kerry can win by properly explaining why the economy went into recession without blaming the American people. He can't win by raising taxes just to end the recession. That's BS and the smarty-pantses who think it works also drove the Democratic Party into a massive defeat in 2002. They should be banished from any position of decision-making, they should be exiled to a desert island until next February.

How bad news for "Shrub" is this? So bad even the partisans at NATIONAL REVIEW didn't try to spin the 112,000-new-jobs release. They merely noted that at least the statistics were released at a time (=Independence Day weekend) when comparatively few people pay attention. And they are grateful for that.

http://www.nationalreview.com/kerry/kerryspot.asp


MARCU$

Marcus' observation about the National Review is interesting, because Fox did try to spin it. The bottom-of-screen headline I saw was "Bush Was Right!" That's pretty bad even for those guys. They must be getting nervous.

From THE ECONOMIST:

http://www.economist.com/world/na/displayStory.cfm?story_id=2910706

"Is the recovery losing momentum?"

"PITY the Republicans. No sooner had America's jobs figures become rosy enough to brag about in campaign ads, than the pesky statistics stopped playing ball. According to numbers released on July 2nd, only 112,000 new non-farm jobs were created in June, far fewer than in each of the previous three months and less than half what analysts were expecting. After rising for four months, jobs in the politically sensitive manufacturing sector fell. The average work-week shortened and the unemployment rate is stuck at 5.6%. "
[...]
"the number-crunchers also revised down the jobs figures for April and May a bit. And other evidence suggests America's economy may be cooling somewhat. Durable goods orders (admittedly yet another highly volatile indicator) fell in May for the second consecutive month. Vehicles sales were decidedly lame in June. Measured at an annual rate, only 15.4m light vehicles were sold in June, a sharp fall from the 17.8m rate in May. And, perhaps most significant, several big chain stores, including Target and Wal-Mart, warned that June would be weak."

"It is not all bad. For instance, consumer confidence looks robust (the Conference Board's index rose to 101.9 in June, its highest level in two years). But for Mr Bush, even conflicting signals look dangerous. For the past few months, his campaign has been frustrated by how little his poll ratings have benefited from a string of uniformly rosy economic statistics. If the economic numbers are less rosy, then the poll numbers could yet go down."