For a while, it looked as if the conclusion to the 2004 election would prove to be a rejuvenating tonic for the nation’s economy. Then, as has happened so often over the past three years, news on the jobs front fell short of expectations.
The latest disappointment came Friday with a government report that payrolls grew by just 112,000 workers in November, far below the 200,000-job gain many economists had expected. As if that wasn’t enough, the government revised significantly downward the job gains for the previous two months.
It was another bump in what has been a torturous road for America’s labor market, which some hoped would improve when the presidential election was promptly settled. Even though the economy has been out of the recession since November 2001, the country still has not recouped all the jobs lost since March 2001, the month the downturn began.
In terms of job production, this expansion so far is the worst of all time, with far fewer job created than during the first three years after the 1990-91 recession. During the presidential race of 1992, Bill Clinton used the charge of a “jobless recovery” to good effect to defeat Bush’s father.
Democrats tried the same thing this year, taunting Bush with the charge that he would be the first president since Herbert Hoover to have a net loss of jobs during his first four years in office.
Net job loss for Bush
Bush won re-election anyway, but the Democrats’ reproach still could prove true. Bush still has a net job loss since taking office of 313,000 and just two months to make it up. Many analysts believe he will escape the Hoover label, but just barely.
Economists have a variety of explanations why job growth has been so anemic. Increased global competition and a soaring trade deficit have contributed to the loss of 2.7 million manufacturing jobs since Bush took office.
Facing such competitive pressures, U.S. businesses have searched for every way possible to squeeze more output from existing workers. That has sent productivity rising but has depressed job and income growth.
“We’ve seen a number of lean years for workers,” said Mark Zandi, chief economist at Economy.com. “They are still waiting for their fair share of the economic pie, and it looks like they will have to wait a little longer.”
The Bush administration, as it did during the campaign, insists that things are turning around. Since hitting rock bottom with a loss of 2.6 million jobs in August of last year, the economy has managed 15 consecutive months of job gains, totaling an increase of 2.3 million jobs through November.
Ups and downs
But even during the latest period of job gains, the monthly increase often has proved disappointing with a strong month or two of job gains followed by a lackluster one.
When the economy created 303,000 jobs in October, a figure originally reported as a gain of 337,000 jobs, many analysts hoped that the job machine was finally kicking into higher gear.
The jump in employment was just one of a number of signs after the election that seemed to indicate the economy was gaining momentum as Americans were relieved that the 2004 elections did not turn into a repeat of 2000 when the country didn’t know for more than a month who had won.
That the election passed without a terrorist attack, and oil prices retreated from the record $55 per barrel highs of early fall, also helped provide a boost to Wall Street. The Dow Jones industrial average finished last week on a winning note, helped by a 162-point gain Tuesday, the third largest one-day jump this year.
‘Light at the end of the tunnel’
“Clearly, uncertainties have diminished. We are beginning to see some light at the end of the tunnel,” said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis.
Sohn said he believed the economy would be able to create an average of 200,000 payroll jobs per month in 2005. That would compare to average monthly job creation of 185,000 this year.
Sohn and other analysts believe stronger job growth will occur as companies exhaust their ability to squeeze more work out of existing employees and finally begin hiring actively on a sustained basis. Still, analysts are not looking for the unemployment rate to move much.
David Wyss, chief economist at Standard & Poor’s in New York, predicted the jobless rate probably would be at 5.2 percent at the end of 2005, only a slight improvement over the current 5.4 percent.
As for overall economic growth, analysts are looking for the pickup in job creation to be accompanied by a slowdown. Many analysts believe the gross domestic product will increase by just 3.5 percent next year, a solid performance but down from an expected 4 percent this year.
With more people working, that still should translate into a pickup in income growth. “The unemployment rate is below its historical average, real growth is running above its historical average, and inflation is mild,” Wyss said. “Things could be a lot worse.”