by John M. Curtis
(310) 204-8700

Copyright December 29, 2003
All Rights Reserved.

ooming on the horizon is next year's presidential election, often a referendum on jobs and the economy. Conventional wisdom holds that Bush's father lost in 1992 to Bill Clinton due to a stubborn recession, with the electorate getting fed up and hoping for better times. Truth be told, H. Ross Perot captured 19% of the vote, dashing Bush- 41's chance for a second term. Today's situation reveals some striking parallels but also stark differences from 1992. Since Sept. 11, voters are more concerned about national security, especially fighting terrorists in Iraq. Unlike 1992, the nation's at war with a stealth enemy, promising new and more deadly attacks. Bush-43 enjoys better approval ratings than his father, now hovering around 58%, though terrorism, jobs and the economy weigh on voters' minds. With the nation still divided down the middle, next year's race is no shoe-in for either party.

      Looking at the employment picture, economists are baffled by the slow pace of adding new jobs. Since Bush took office, the nation as shed over 2 million jobs, the first loss since Herbert Hoover and the great depression. Bush's defenders point out that the current down cycle began under Clinton's watch in March 2000, when a bloated stock market—especially the tech-rich Nasdaq—began to burst. When the dot-com bubble popped, the economy shed thousands of new jobs, euphemistically called “the new economy.” Areas like California's Silacon Valley and other tech centers were especially hard hit, as the booming stock market continued its inexorable meltdown. Though the nation's unemployment rate stands at 5.9%, new technology and “economies of scale” enabled businesses to function with fewer employees. Some wonder whether the ‘90's excesses will ever return.

      Many former full-time employees now work part-time, leaving the job picture looking better than it actually is. Unable to show real earnings over the last four years—yet armed with more efficiency—corporations are reluctant to add to payrolls, causing the current “jobless recovery.” Keeping payrolls lean reduces overhead, the biggest threat to quarterly profits. Improving sales won't improve earnings unless payrolls are held in check, creating a dilemma for the jobs picture. Heading into next year's election, jobs and Iraq occupy center stage. “I have three goals for my presidency: jobs, jobs, jobs,” said Rep. Richard Gephardt (D-Mo.), whose languishing campaign needs more than promises about more jobs. Seizing the moment, Democratic front-runner former Vermont Gov. Howard Dean blasted Bush for causing the “worst job creating record in over 60 years.”

      Recognizing this weakness, President Bush touted recent employment gains as proof of economic success. “More workers are going to work, over 380,000 have joined the workforce in the last couple of months,” he told a crowd at Home Depot in Maryland, celebrating a one-tenth percent drop in unemployment to 5.9%. Yet some economists don't see the official unemployment number as indicative of the overall jobs picture. Since Jan. 2001, the economy shed over 2 million jobs, creating a catch-up problem for Bush during an election year. For whatever it's worth, since 1960 the White House lost when jobs contracted during the first half of an election year. When jobs expanded during that same period, the White House won. With third-quarter growth over 8%, some economists remain puzzled by anemic jobs growth, though unemployment typically represents a lagging indicator.

      Keeping interest rates at the lowest levels in 45 years, Fed Chairman Alan Greenspan still has concerns about a possible “double-dip,” where the current recovery won't last. Like other quick fixes, artificially low rates have caused the dollar to tumble against foreign currencies. Deflating the dollar helps exports but hurts the economy by driving away foreign capital. With the dollar deflating, the U.S. is no longer a safe haven for foreign investment. Now down 25% against the Euro, the Fed can't allow the dollar to fall much further without intervening, including the unpopular tact of raising interest rates. “When are they [jobs] going to return?” asked Richard B. Freeman, director of labor studies at the National Bureau of Economic Research, questioning when Bush might see a real improvement in the job market. Some economists believe the unemployment rate doesn't give the true labor picture.

      No matter how you cut it, the official unemployment rate gives at least some way to gauge an improving economy. Whether it lags or not, voters still use the official number to measure White House performance. “There's certainly an arbitrariness to the official rate,” said Princeton University economics professor Alan Krueger, arguing that today's number under-represents the amount of real people out of work. “If you plot job losses versus gains on a chart, it's shocking,” said Eric Goshen, an economist with the Federal Reserve Bank of New York, concerned about the slow rate of job creation. “If this goes on too long, you'd have to worry there's something fundamentally wrong,” said Goshen, hinting that Greenspan's current monetary policy reflects a sick economy, hobbled by a weak dollar and ballooning deficits. If the jobs picture remains weak, Bush will have a lot of explaining to do.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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