TCS Daily


More Depressions Like This, Please

By Noel Sheppard - January 12, 2005 12:00 AM

Remember all that talk during the just concluded presidential campaign about this being the worst economy since the Great Depression? Or that President Bush's jobs performance is the poorest since Herbert Hoover was in office?

Well, with the close of the 2004 calendar year comes the end of Mr. Bush's first term. Maybe without all the distractions and distortions that accompany a political campaign we can better determine what the real economic results are since our 43rd president was inaugurated.

Let's begin with jobs. This past Friday's December employment report paints quite a different picture of the U.S. economy than what has been regularly asserted by the president's detractors. In fact, the preliminary data (chart below) show a gain of 157,000 non-farm workers for the month, bringing the total increase for 2004 to 2.2 million. This is the largest number of jobs created in one year since 1999, even greater than in the year 2000 as the tech stock bubble was hitting its zenith. Unfortunately, this still represents a 175,000 decrease since Mr. Bush took office.


An even more positive assessment of job growth under this administration is reflected in the Household Survey, the second of the two analyses done each month to determine employment levels in our nation. The first -- whose data was addressed in the previous paragraph -- is accomplished by the Bureau of Labor Statistics (BLS), and is referred to as the Establishment Survey. In this poll, 390,000 employers (establishments) are asked questions by either phone or mail to try to determine a fair estimate of all Americans who are presently employed by companies and government offices. Concurrently, the Household Survey is performed each month by the Census Bureau in the form of telephone questionnaires to 50,000 residences in 792 different regions of the nation. In reality, both of these reports give economists and lawmakers valuable information about employment trends, wage issues, gender and race statistics, etc.

As one can plainly see from the following chart, unlike the data depicted by the Establishment Survey, the Household Survey shows an increase of 2.5 million jobs since Mr. Bush took office, and a 4.5 million rise from the January 2002 recession low.



So, why the huge disparity in these reports? Well, since the Establishment Survey only includes people who are employed by companies or governments, it fails to address -- as the Household Survey does -- those who work for small businesses, or are self-employed, consultants, or independent contractors. For instance, mortgage brokers, insurance agents, accountants, beauticians, manicurists, lawyers, etc. This is why the Establishment Survey is actually understating employment by about 8 million workers. Consequently, the jobs picture in our nation is much stronger than has typically been reported.

Another highly publicized campaign fallacy was that Americans are making less money today than before Bush was inaugurated. As illustrated by the chart below, when Bush took office, the average weekly pay for production or non-supervisory employees was $485. In December, it was $536 -- a 10.52% gain. This increase in wages -- also contrary to politically oriented assertions -- is greater than the 9.77% rise in inflation during this four-year period as measured by the Consumer Price Index (through November 2004). This means that when you combine lower tax-rates for all wage earners, the inflation-adjusted after-tax incomes of Americans have continued to rise during Bush's first term.



Certainly, another sign of depression would be declining consumer net worth -- the total of consumer assets minus liabilities -- which obviously plummeted during the 1930's. Strangely, during the Bush "depression," this statistic rose to a new all-time high of $45 trillion by the end of 2003 -- yes, even greater than at the stock bubble peak in March 2000. Without the final data for 2004, it is safe to assume that this net worth is significantly higher today given last year's 9% increase in stocks (S&P 500), and a likely similar gain in residential real estate values.

Speaking of real estate, one of the most amazing things that occurred during the Bush "depression" was the explosion in residential home ownership and prices. When Bush took office, 66.2% of Americans owned their own homes. By the end of 2003, this number had jumped to 68.6%, and will certainly be higher when 2004's final numbers are in. This is a 2.4% increase in Bush's first three years in office. To put this in perspective, such ownership only rose by 0.8% during the "boom" of President Clinton's second term. In fact, this percentage only increased by 1.8% during Clinton's two terms. Furthermore, the actual value of homes climbed to an all-time high of $15.2 trillion by the end of 2003 -- a 33% increase since Bush took office. Again, with what transpired in real estate in 2004, this number will likely be significantly higher.

Of course, the true sign of a depression is a severely declining Gross Domestic Product. For instance, in 1930, our country's sales of goods and services totaled $97 billion. In 1931, it dropped to $84 billion. In Hoover's last year in office, it was down to $67 billion. By contrast, under President Bush, the GDP has increased every year from 2000's $9.7 trillion. Even in the midst of the recession of 2001, our GDP still rose to $10 trillion. In fact, if we hit analysts' estimates, 2004's number will be $11.5 trillion -- a full 18% higher than when Mr. Bush took office.

So, when you add it all up, we now have accelerating:

  • Job growth
  • Wages
  • Consumer net worth
  • Stock valuations (up 50% from their post-recession lows)
  • Home ownership and prices
  • GDP

Frankly, with depressions like these, who needs expansions?

Noel Sheppard is an economic and geopolitical analyst and writer residing in Northern California. Noel welcomes e-mail at slep@danvillebc.com.

(All charts courtesy of the Bureau of Labor Statistics, www.bls.gov.)

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