Solid Jobs Solid GDP

TownHall.com ^ | Oct 11 2004 | Larry Kudlow

[branch1]

Solid Jobs, Solid GDP Larry Kudlow (archive)

October 11, 2004 | Print | Send

U.S. job creation continued to move ahead at a steady pace with the announcement Friday that 96,000 non-farm payrolls were added to the economy. Over the past thirteen months 1.9 million new jobs have been created. The unemployment rate stands at a historically low 5.4 percent. One hundred forty million Americans are now working, a new U.S. record.

The brightest spot in the Labor Department’s September report is a 3.2 percent annual rate of increase for third quarter hours worked. This is the strongest quarterly rise in seven years. It probably foreshadows 5 percent real GDP growth for the third quarter, a number that will be released on the last Friday before the Tuesday presidential election.

At lower personal tax-rates more people are working, and they are working longer hours to produce more. This is consistent with supply-side thinking that lower taxes enabling people to keep more of what they earn generate new incentives for greater work effort.

As for wages, average hourly earnings have increased by 3.1 percent annually through September. This number has been steadily rising over the past year from a meager 0.8 percent increase registered in October 2003.

Since George W. Bush was elected President, 585,000 payrolls have been lost. However, 1.69 million more people are working today according to the Labor Department’s other jobs survey -- the household survey. Since the end of the recession in late 2001, 908,000 new payroll jobs have been created, but 3.4 million more people have gone to work since then, according to the household survey.

The Bureau of Labor Statistics argues that on a month to month basis the household survey is more volatile than the establishment payroll survey. However, longer-term trends for the population survey are significant.

In order to put the two surveys on a more comparable basis, the BLS has adopted a methodology that removes self-employed workers from the household survey and also takes out the multiple (and redundant) job tallies in the payroll count. As a rule of thumb, it is useful to split the difference between the two surveys in order to get a better sense of the real new jobs number.

Once you do this, you see that 553,000 jobs have been created during the Bush administration. Since the end of the recession, this method produces 2.2 million newly employed.

The Kerry campaign has defined the economy in terms of the weaker payroll survey numbers. But the most comprehensive measure of economic output is still the gross domestic product, adjusted for inflation. Hopefully, President Bush will emphasize GDP in the remaining weeks of the campaign. During the ten recovery quarters since the end of 2001, real GDP growth has averaged 3.4 percent, in line with its long-run post-WWII annual expansion average of the past 57 years. Over the past four quarters since the supply-side tax cuts legislated in the spring of 2003, real economic growth has jumped to 4.8 percent.

What’s more, personal income is growing at 5 percent over the past year. This measure includes wages, salaries, rents, interest, dividends, and Social Security payments. Like GDP, it is a comprehensive measure of the economy’s progress, especially in terms of individual and family economic power. Adjusting for inflation, real income has increased 2.6 percent over the past year, a hefty gain. Total compensation, which reflects wages, salaries, and non-cash and non-taxable benefits like healthcare, has grown 3.9 percent (adjusted for inflation) over the past year.

These are all solid numbers. They show a healthy and growing economic prosperity. Mr. Bush should use these data to rebut Sen. Kerry’s silly charge that this is somehow a Herbert Hoover economy.

John Kerry, as we know, has a fondness for Europe. But their GDP is growing by less than 2 percent. Their unemployment rate is close to 10 percent.

Bush has nothing to be ashamed of. The resilient, durable, free-market U.S. economy, bolstered by supply-side tax cuts, has in fact delivered the jobs and the goods. This is especially remarkable in view of all the negatives thrown at us, such as a busted technology bubble, a recession, massive corporate scandals, the 9/11 attacks, two wars, and more recently an oil-price shock. With all that, the U.S. economy is growing roughly three-times faster than Europe’s, with an unemployment rate that is only half what it is on the other side of the pond.

Hopefully Bush will hammer all these points home in Wednesday evening’s forthcoming debate.

[NeoCaveman]

I would be interested to know what these "new" jobs are paying? Are these 7 dollar an hour at Mac D's or are these 20 dollar an hour mfg, svc and/or white collar 50K a year and up jobs???...hmmmmmmm

One potentially could figure this out easily. One would need the Medicare taxes paid and divide by total employment then compare this number over the years.

[Willie Green]

It's ALL bullcrap.

[NeoCaveman]

Hey AC don't parade on Willie's rain

[chris9soccer]

I was unaware such a breakdown of job type is never accurately tracked.

I doubt this is the answer you are looking for so I look forward to you telling me your thoughts. I can't speak of the last few decades but can address the last decade. Speaking from my experiences at the textile and specialty chemical manufacturing company I work for, the decline in jobs has been a result of NAFTA, CAFTA and soon to be favored nation status of China (wait for this in Jan.). US manufacturers are just asking for a fair playing field and our gov't isn't demanding it. It's unfortunate our gov't is willing to do business with foreign companies who are not held to the same standards as our domestic companies.

I'll add that the decline of manufacturing jobs not only hurts the overall strength of or economy but also puts our military in a bad spot. They may see a time when they are forced to rely on foreign countries to supply the uniforms and materials they need if we don't maintain the infrastructure here.

[Alberta's Child]

Sure it is. That's why someone who earns $7 an hour gets a mailbox full of credit card solicitations every day.

[Camel Joe]

So what are you a crack dealer or govt. subsidized slum lord?

[kellynla]

what I do for a living is none of your business...

I don't know where you learned your debating skills but they definitely need as much improvement as your manners...

good day

[remember]

U.S. job creation continued to move ahead at a steady pace with the announcement Friday that 96,000 non-farm payrolls were added to the economy. Over the past thirteen months 1.9 million new jobs have been created. The unemployment rate stands at a historically low 5.4 percent. One hundred forty million Americans are now working, a new U.S. record.

Of course, we have been setting a new record for Americans working nearly every month of every non-recession year. In any case, it's easy to be misled by the large numbers being thrown about. The following table shows the average monthly and annual gain in jobs under every President since Kennedy:

             TOTAL NONFARM EMPLOYMENT (thousands)

                                       No. of  Monthly   Annual
      Term   Mo  Year   Count  Change  Months  Average  Average
---------------------------------------------------------------
Kennedy     Jan  1961   53683    5900      48    122.9     1475
Johnson     Jan  1965   59583    9855      48    205.3     2464
Nixon       Jan  1969   69438    6182      48    128.8     1546
Nixon/Ford  Jan  1973   75620    5072      48    105.7     1268
Carter      Jan  1977   80692   10339      48    215.4     2585
Reagan 1    Jan  1981   91031    5322      48    110.9     1331
Reagan 2    Jan  1985   96353   10780      48    224.6     2695
G.H. Bush   Jan  1989  107133    2592      48     54.0      648
Clinton 1   Jan  1993  109725   11507      48    239.7     2877
Clinton 2   Jan  1997  121232   11156      48    232.4     2789
G.W. Bush   Jan  2001  132388    -821      44    -18.7     -224
            Sep  2004  131567
----------------------------------------------------------------
Total (Kennedy thru Clinton)    78705     480    164.0     1968
Total (Kennedy thru G.W. Bush)  77884     524    148.6     1784

Source: http://data.bls.gov/cgi-bin/surveymost?ce,
        Series CES0000000001 

As the table shows, the average job gain from Kennedy through Clinton was about 164 thousand jobs per month and nearly 2 million jobs per year. Hence, 1.9 million jobs in 13 months is not even quite average. The 96,000 jobs created last month is well below average. Even the 3.4 million jobs that Kudlow says have been created since the end of the recession in 2001 according to the household survey is below average. Hence, it's not surprising that the growth in jobs has fallen behind the forecasts given in the last three Economic Reports of the President. The following graph shows the forecasts and the actual results according to the payroll and household surveys (the numbers can be seen at http://home.att.net/~rdavis2/employed.html):

[branch1]

I'm not sure if your background has ever given you cause to peruse the Statistical Abstract of the US. If not it offers a wealth of info on just about any topic. All of komrade kerry's claims can be disproved and not by a cabal of "right wing extremists". Besides the 5 million additional employed, the per capita income is at a record high. $7/hr wages couldn't have produced that. You can view the abstract and look at a state by state breakdown of income, percentages of increase, number or percentages of people making a certain income range and the change from the previous year. The only drawback is that nearby data is one to two years old.

[kellynla]

thanks but it would seem that someone would be able inform us what these jobs are paying
working at Walmart making seven bucks an hour instead of a living wage is no bargain...
especially when our tax dollars pay for the medical care and the food stamps the new hourly employees have to apply for just to buy groceries where they work...
while the corporate types like the Waltons are livin' like rock stars...

[branch1]

Actually manufacturing jobs were higher in 1967 than at any time in the clinton administration. The zenith was in 1979 and it was downhill from there. The largest losses in manufacturing jobs comes not from the US but Brazil and China. As capital expenditures increase in plant and equipment, as new technology comes on board, the number of workers necessary to produce the same output decreases. Since productivity is increasing at an ever increasing rate, prices have remained relatively stable and low.

[branch1]

I don' know what Wal-Mart pays their employees but I would surmise that $7/hr figure is an entry level position and as such probably not the top income someone could expect in a long term sevice. Also I'm sure Wal-Mart has an industry average health care coverage, so we are not paying for their health care. Don't know just guessing. As far as food stamps goes, these entry level employees are probably not the primary wage earners and are not eligible for food stamps. I've looked in the Constitution and cannot lay my finger on that article that specifically enumerates people have a right to a living wage. Your reference to the Waltons smacks of class warfare, which I hope someday this country - especially the left - will abandon.

[1rudeboy]

...while the corporate types like the Waltons are livin' like rock stars....

I remember reading somewhere that Wal-Mart executives fly coach and stay two to a hotel room.

[kellynla]

the Waltons are BILLIONAIRES...

[branch1]

I would be remiss if I didn't point out that the years ( with the exception of the clinton years ) referenced include the largest demographic this country has ever witnessed, the baby boomers. That was a huge mass of humanity. Also for the first time since WW11, women became an integral part of the work force instead of homemakers. Right now we are at 5.4% unemployment 2/10's of a point below 1996. Before we hit 4.2%, the last time unemplyment was that low was in 1962. So a number this low is an anomaly not the norm. To have economic growth at over 4%, unemployment at 5.4% and inflation hovering around 2% goes against all the conventional thinking of the economic intellectuals. I should know. This was hammered into me ad nauseum for four years in college.

[kellynla]

I don't like subsidizing the Waltons' and other coroporations' employees with food stamps and medical care with my hard earned tax dollars while the Waltons bring in billions, thank you.

I take care of mine and I expect others to do the same.

[branch1]

What I hope and pray for is that some day the federal government will get out of the business of welfare at any level for anybody. If the states wish to invent a socialist Utopia, then those states' constituents can vote it in or vote out the morons who believe socialism is a viable alternative to the Framers original intent of limited government.