Bush is looking at net loss of jobs

`Bad timing': Economists say several factors converged to hold down employment growth.

October 08, 2004|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

Of criticisms of George W. Bush on domestic policy, it might be the most startling:

He's likely to be the first president since Herbert Hoover to end his term with fewer jobs than when he began.

The Hoover comparison has been raised numerous times by Democratic challenger Sen. John Kerry and in media accounts. It's likely to surface again today, when the federal government releases the final set of monthly employment statistics before the Nov. 2 election.

Economists expect to see decent growth, but not even the most optimistic think today's report will move the president from a net loss of more than 900,000 jobs to a net gain, dating back to when he took office in January 2001.

How did this happen? How did Bush preside over less job creation than Jimmy Carter, whose term was mired in double-digit interest rates and an energy crisis, or Ronald Reagan, who led during the Cold War and a much more severe recession, or Lyndon B. Johnson, who lacked the support to run for re-election but nevertheless finished the tumultuous second half of the 1960s with nearly 10 million new jobs?

Economists don't blame Bush for any particular action fueling job loss. The collective analysis is that his term was buffeted by an unusual convergence of events. "Bad timing," Haseeb Ahmed, a senior economist at Economy.com, called it.

Among factors that held down employment growth: productivity advances that enabled companies to grow without hiring, the 1990s tech boom that had fattened work forces to a level that was difficult to sustain, the terrorist attacks and recession in 2001 and the corporate accounting scandals in 2002.

"Every time businesses stuck their heads out of their turtle shells ... the next crisis came along and whacked them on the head," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa.

But Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland, is convinced that Bush could have mustered a net gain in job creation if he had vigorously challenged China's economic policies. He contends that China's manipulation of its currency continues to drive down the cost of products there compared with the United States.

"The currency problem is the root cause of joblessness in America," said Morici, who notes that he's not impressed with Kerry's stance on the issue either.

The months of ambiguity before the fighting began in Iraq in March 2003 acted as another drag on job creation, economists said.

"Uncertainty is very, very bad for an economy," said Dawn McLaren, research economist at Arizona State University's Bank One Economic Outlook Center.

From 1929 to the beginning of 1933, Hoover presided over a loss of 8.2 million jobs during the nation's greatest economic crisis, which included the stock market crash. Since then, the country has averaged a gain of 6 million jobs each presidency.

As the economy and hiring picked up during the past year, businesses have added an average of 140,500 jobs to their payrolls each month - not quite enough to keep up with population growth.

The loss of jobs was even more peculiar given that unemployment, which rose as high as 6.3 percent last year, has dropped to 5.4 percent. That's half the rate of unemployment by the end of 1982, Reagan's second year, and the same as when Bill Clinton was re-elected in 1996. Not exactly the Great Depression under Hoover, when one out of four people was out of work.

But economists note that the portion of Americans working or looking for work has declined since 2001. Some attribute that to discouraged workers dropping out of the labor pool as they decide to pursue more education or other options. In fact, if the labor force swelled back to 2001 participation levels, the unemployment rate would jump to about 7 percent.

Mark Vitner, a senior economist for Wachovia Corp., a Charlotte, N.C.-based financial company, believes that Bush deserves some credit for keeping job creation from being even worse considering the attacks of Sept. 11 and other factors. The rebate checks from his tax cuts during the summers of 2001 and 2003 arrived when the economy needed a boost, Vitner said.

It's a minority view, but he is also convinced that there are more jobs in America than the Labor Department is reporting. He points to the Atlanta area, which has grown by almost 300,000 people during the last four years, with office leasing and home sales up and highways crowded - but payroll surveys showing no new jobs.

"These kinds of things do not happen in the absence of job growth, so there is no question in my mind that we're understating employment," said Vitner, who is expecting to see upward revisions for past months when the Labor Department releases its national statistics today.

No president wants an economic record that can be compared to Hoover's, but it's not proven a particularly persuasive campaign point for the Democrats so far. Sixty percent of American voters wanted Hoover out; Bush and Kerry are running neck-and-neck.

A recent study of historical voting results by academics at the University of Michigan and the University of Southern California suggests that Americans don't hold presidents responsible for local economic conditions, in any case. They look at the national employment picture instead - and they don't ask themselves if the country is better off now than it was four years ago.

"The last year is what seems to matter," said Daniel Eisenberg, an economist who co-authored the study. And this past year is by far Bush's best when it comes to jobs.

"My guess is that regardless of who wins this election, we're set up for either President Bush in the second term or President Kerry to preside over six, seven, eight, maybe even 10 million new jobs created - because Bush has taken all the hits in the first term," said Stephen Stanley, chief economist at RBS Greenwich Capital. "Sometimes, timing is everything."

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