TCS Daily

Talking Down the Economy

By James K. Glassman - August 12, 2004 12:00 AM

Democrats and their allies in the media have been giddy the latest jobs report. The New York Times said it showed that July "was a sputtering, tepid month" -- a boon to Democrats.

John Kerry said Friday's report showed that instead of "turning the corner," as President Bush claims, the report shows the economy was "taking a U-turn." He added, "Millions of good jobs [are being] lost to plant closings and outsourcing."


Pessimism about the economy helps Kerry and his friends, but an objective look at the report shows a very different picture. Yes, the number of people employed in July rose only slightly, by 32,000. But the unemployment rate dropped to 5.5 percent -- down from 6.3 percent a year ago and the lowest since October 2001, right after the 9/11 attacks.

The rate today is lower than when Bill Clinton was running for re-election in 1996. It's lower than the average unemployment rate in the 1990s -- not to mention the 1980s and 1970s. Plant closings are way down from a year ago, and the threat of outsourcing is a figment of Lou Dobbs's imagination.

I don't want to overwhelm you with numbers, but I am sick and tired of the biased bleating that passes for economic analysis these days. Look at this....

     Friday's report also showed that a survey of jobs taken by sampling households rather than businesses registered a gain of 629,000 in July. Hourly earnings and hours worked were up. The economy has now gained 1.2 million jobs since the start of the year, winning back two-thirds of those lost in the recession Bush inherited from Bill Clinton.

     Second quarter profits for the 900 companies tracked by Business Week rose an incredible 32 percent. Business investment is soaring, up 14 percent for the year. The Institute for Supply Management's measure of manufacturing activity, which includes orders, inventories and employment, is at lofty levels not seen since the 1980s.

    Over the past 12 months, David Malpass of Bear Stearns points out, the U.S. economy -- measured by our GDP has grown at a rate of 4.8 percent. That's faster than in any 12-month period during the Clinton administration and three times as fast as Germany and France are growing.

My own view is that the U.S. economy is strong, and, rather than weakening, it will get stronger as the year goes on. Our problems right now are oil prices, which experts expect to decline, and stock prices, which react negatively when Kerry's fortunes rise.

I agree with Jason Rotenberg of Bridgewater Associates, one of the nation's best research firms: "There is little reason to expect the US economy to slow down in any significant way. July will probably shape up to be a strong month, and employment growth in the second half of 2003 is likely to remain strong."

How to explain the jobs report? "The weak total is colored by seasonable adjustment factors," as, the respected Internet service, put it. Month-to-month payroll samples are practically meaningless. What counts are longer-term figures -- and what really counts is the perception of voters.

Here, Republicans can take heart. "Nearly 20 percent of surveyed consumers," says, "believe that jobs are plentiful, the strongest such assessment in more than two years."

If the slight job gain in July is accurate, it almost certainly shows nothing more than what Bridgewater calls "a wiggle in the recovery" and Fed Chairman Alan Greenspan calls a "soft patch."

But let's assume it's more significant. Kerry's diagnosis -- that the weakness is the result of our shipping jobs overseas -- is flat-out nonsense. No serious economist believes that. "Outsourcing jobs overseas is a minor problem," says the excellent non-partisan website, and "that Kerry's plan wouldn't do much to fix."

Bush's response to the recession was far from radical. It was classic Keynesian medicine: lower taxes, higher government spending and lower interest rates. There's not much more that public policy can do, which is why the Democrats don't offer remedies, just criticism.

Negative psychology can derail the recovery just as easily as high oil prices. But maybe that's the point. A booming economy is the worst nightmare for Kerry and his pals in the press, so it's hardly a surprise that they're talking it down. It's the only economic strategy they have.


TCS Daily Archives