April 5, 2004
by Irwin Stelzer
President Bush and his re-election team have had their cheeriest weekend in a long time. Some analysts say that they could hear champagne corks popping in the White House at 8:30 A.M. Washington time on Friday, when the latest jobs figures were announced. The teetotal president would hardly deny his staffers their celebration after a gloomy week in which he had been savaged for alleged failures to anticipate the attacks of September 11.
Not only did the Labor Department announce that the economy had added 308,000 new jobs in March—the largest increase since April 2000. In addition, the government revised its job creation figures for January and February from 118,000 to 205,000. Since August 2003, payroll employment has risen by 759,000.
Better still from the president's point of view, the gains were spread across the entire economy. Employment is up in the construction, health care, retail trade, construction, and social services sector, and the number of factory jobs stabilized.
If this rate of job creation continues until the election in November, the economy will have regained all of the jobs that have been lost in the recession that Bush inherited when he moved into the White House. That would have profound political and economic consequences.
Indeed, even this one-month figure will have important effects. One month may not make a trend, but in this political year every scrap of economic data is a weapon for one side or another. John Kerry has been scoring points by accusing Bush of being the first president since Herbert Hoover to preside over a reduction in the number of jobs available to American workers. Kerry says that this reduction is due to "outsourcing," and has rolled out the big Democratic guns to stomp the country promising to stop CEO-traitors from shipping jobs to China and India if they take over the White House.
Hillary Rodham Clinton, the New York senator who is campaigning for Kerry but secretly hoping he loses so as to clear the way for her own presidential bid in 2008, says, "I thought I had lost the ability to be shocked"—one can only guess at which events resulted in that loss—but finds she has not. It seems that Republican claims that outsourcing is just another aspect of free trade, and will enrich rather than impoverish Americans by making our firms more efficient, "goes beyond the pale." So much for any attempt to introduce reason into debates about economic policy in an election year.
Now, Kerry will have to reconsider his "It's the economy, stupid," campaign. Or at least refine his argument if he is to continue labeling the president as the Darth Vader of the jobs market. The Massachusetts senator can point out that 4.7 million Americans who are working part-time would prefer to have full-time employment. And that over half-million workers have abandoned the job hunt "because they believed no jobs were available for them," according to the Labor Department. Still, that does not have the sound-bite resonance of his earlier argument that Bush is a latter-day Herbert Hoover, creating jobs for Chinese and Indian workers but not for Americans.
Nor is Kerry likely to make much headway with his charge that Bush has not been tough enough with the OPEC cartel that has driven up crude oil and gasoline prices. Not that the president, whose family has long and seemingly enduring ties to the Saudi rulers, has done very much to persuade the Saudi royal family that it would be in its interests to step up, rather than curtail production. It is that Kerry, who proposes a foreign policy noticeably less muscular than the president's, can't explain just what he would do to whip the Saudis into line. And he has to worry that the Kingdom's oily ambassador to the U.S., prince Bandar bin Sultan bin Abdulaziz Al-Saud, slipped into the White House late last week to assure the president that his nation's target price is $25 per barrel, and that the Saudis are expecting prices to fall by $10 per barrel from its current $35 level in the near future as hedge funds unwind positions and the weather warms. Bandar, of course, is more famous for his lavish entertaining of key legislators than for his skill as an oil-price forecaster. But if he delivers on this promise, Kerry will see still another plank removed from his economic platform.
Kerry is not the only person in Washington who had to spend the weekend doing some hard thinking. Federal Reserve Board chairman Alan Greenspan, who has long anticipated renewed job growth, will have to decide whether to retain his stated "patience," and keep interest rates at current low levels. Economists at Goldman Sachs say there is "a whiff of inflation" in the air. Commodity prices are up, in response to buying pressure from a resurgent American economy and double-digit growth in both China and India. A continuation of anything like the March performance of the jobs market should quickly sop up excess capacity in the labor market, producing upward pressure on wages. Greenspan might just have to advance the date on which he begins to move rates up.
Meanwhile, the new jobs figures are likely to give consumer confidence a shot in the arm. The latest report by the non-profit Conference Board showed confidence steady, with the main deterrent to an increase in cheerfulness being that consumers "claimed jobs were less readily available" than in the recent past, according to Lynn Franco, director of the Board's consumer-research centre. That was two days before Friday's job news, so consumers may be cheerier now—but nowhere near as elated as the White House team.
This article appeared in London’s Sunday Times on April 4, 2004.
Irwin Stelzer is a Senior Fellow and Director of Economic Policy Studies for the Hudson Institute. He is also the U.S. economist and political columnist for The Sunday Times (London) and The Courier Mail (Australia), a columnist for The New York Post, and an honorary fellow of the Centre for Socio-Legal Studies for Wolfson College at Oxford University. He is the founder and former president of National Economic Research Associates and a consultant to several U.S. and United Kingdom industries on a variety of commercial and policy issues. He has a doctorate in economics from Cornell University and has taught at institutions such as Cornell, the University of Connecticut, New York University, and Nuffield College, Oxford.
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