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If You Don't Believe Me, Read Paul Krugman

On July 2nd, I posted my rant on "About That 'Booming' Economy", taking off from the poor June job numbers. If I didn't quite convince you, Paul Krugman's column today, "Bye-Bye, Bush Boom" should.

Here's the key section of the article, but you should read the whole thing:

When March's numbers came in much better than expected, I cautioned readers not to make too much of one good month. Similarly, we shouldn't make too much of June's disappointment. The question is whether, taking a longer perspective, the economy is performing well. And the answer is no.

If you want a single number that tells the story, it's the percentage of adults who have jobs. When Mr. Bush took office, that number stood at 64.4. By last August it had fallen to 62.2 percent. In June, the number was 62.3. That is, during Mr. Bush's first 30 months, the job situation deteriorated drastically. Last summer it stabilized, and since then it may have improved slightly. But jobs are still very scarce, with little relief in sight.

Bush campaign ads boast that 1.5 million jobs were added in the last 10 months, as if that were a remarkable achievement. It isn't. During the Clinton years, the economy added 236,000 jobs in an average month. Those 1.5 million jobs were barely enough to keep up with a growing working-age population.

In the spring, it seemed as if the pace of job growth was accelerating: in March and April, the economy added almost 700,000 jobs. But that now looks like a blip a one-time thing, not a break in the trend. May growth was slightly below the Clinton-era average, and June's numbers only 112,000 new jobs, and a decline in working hours were pretty poor.

What about overall growth? After two and a half years of slow growth, real G.D.P. surged in the third quarter of 2003, growing at an annual rate of more than 8 percent. But that surge appears to have been another blip. In the first quarter of 2004, growth was down to 3.9 percent, only slightly above the Clinton-era average. Scattered signs of weakness rising new claims for unemployment insurance, sales warnings at Target and Wal-Mart, falling numbers for new durable goods orders have led many analysts to suspect that growth slowed further in the second quarter.

And economic growth is passing working Americans by. The average weekly earnings of nonsupervisory workers rose only 1.7 percent over the past year, lagging behind inflation.

In short, things aren't all that great and--as I've repeatedly pointed out--voters know this. And now, of course, we have John Edwards on the ticket, who can make the reality behind these numbers come alive on the campaign trail. That should further intensify the Bush campaign's trouble defending their economic record.


Krugman is one of the few columnists actually paying attention to facts. I've noticed the area I live in (Northern California) is frequently a barometer of things happening now or soon to happen in other areas. There's a slight improvement in jobs in this area and not much else. Gas prices have dropped about 8 to 10 cents in the last few weeks but they're still 40 cents above what they were a number of months ago. Rents have been climbing for the last three years but have finally leveled off. The real kicker is that energy costs and prices at the store are clearly climbing. One doesn't see it just yet but it's obvious that interest rates on borrowing are about to climb. And inflation is rearing its head. Local colleges are raising fees substantially. Health insurance premiums are expected to jump 35% to 45% during the enrollment period this September, and that's if you're lucky; in some cases, it's higher and employees in many job sectors will have to pick up the cost. Even State Park fees are climbing sharply. What Bush has managed to do is reinvent stagflation.

It seems even THE WEEKLY STANDARD'S Irwin Stelzer is becoming pessimistic. And Stelzer is normally a smug, "Shrub"-boosting, Kerry/liberal/Old Europe-bashing columnist...


"The recent increase in inflation may be due to transitory phenomena such as the commodity price rises that are already slowing, and in some cases reversing, as the Chinese economy cools. And the economy may be slowing. The jobs report, issued just a few days after Greenspan's gradualism ruffled the hawks' feathers, suggests that Greenspan has got it right: Non-farm employment increased by only 112,000, about half of what the inflation hawks were predicting, and average hourly wages rose a mere 0.1 percent. Good news for bonds, bad news for Bush."

"Add to that the facts that the stimulus provided by the Bush tax cuts is fading, and that orders for durable goods in May fell for the second consecutive month. In June, U.S. vehicle sales slowed to an annual rate of around 12 million, well below analysts' forecasts of 13.7 million. Wal-Mart, which accounts for 8 percent of all non-vehicle sales in the United States, last week lowered its forecast of sales growth. This might
sound surprising, since the Conference Board reports that consumer confidence is at the highest level in two years. But another survey, by the University of Michigan, provides an explanation. Confidence among families with incomes of less than $50,000--Wal-Mart's customer base--actually fell in May, while confidence among higher-income groups rose. The feel-good factor in the upper-income groups accounts for the double-digit growth that such pricey purveyors as Starbucks are reporting."