The case of the missing jobs
The Bush administration has a problem. A big problem. Last year, the president and his aides promised that their tax cut would give America what it needed most: jobs. The Council of Economic Advisers predicted that this alone would give work to 510,000 people by the end of 2003 and an additional million or so this year. Never happened. Total job creation was supposed to average out at 306,000 a month, but not even a third of that has been achieved.
The numbers clearly undercut the Bush claim that tax cuts for the wealthy would generate jobs for the middle and working classes. Even the limited job growth we have seen wasn't broad based but was instead concentrated in temporary staffing, education, healthcare, and government. The jobless recovery we're now in is unlike anything the American economy has ever seen before. Typically, the Great American Job Machine energizes our economy. New jobs beget more income, which begets more spending, which begets more hiring, incomes, and spending. The result is a self-sustaining, self-reinforcing economic growth that invigorates the entire private sector.
Ups--and downs. What we're seeing now, however, suggests that there may be something fundamentally wrong in the engine room of the American economy. If the normal trajectory had prevailed, two years after the trough of the recession jobs would have been up around 6 percent, and 7.7 million more Americans would be working. Instead, we have lost 2.5 million factory jobs. Since the 1930s, jobs lost in recession had been more than recovered 31 months later. Now, 34 months later, private-sector jobs are down by 2.5 million since March 2001. In the recoveries of the mid-1970s and 1980s, America was generating about 300,000 new jobs a month within six months of cyclical upturns. In the early 1990s, this expansion slowed to about 200,000 a month, and we had to wait a full two years for that. This time we have seen not a deceleration in job creation but a net loss--the sharpest in any period since the Great Depression, especially in manufacturing. In the 1980s and 1990s, it used to be that a 1 percent drop in gross domestic product resulted in a dip in private employment of between 1.3 and 1.5 percent. This time, with only a one half of 1 percent decline in GDP, the economy shed almost 3 percent of its jobs.
No work--and not much in the way of wage increases either. According to the Economic Policy Institute, inflation-adjusted average wages are flat or falling slightly. Typically, private wages and salaries, which make up about 45 percent of total personal income, rise by 8 percent two years after a recession. This time they are down nearly 1 percent. That translates into a shortfall of about $350 billion in real consumer purchasing power. Ouch! Is it any surprise, then, that 72 percent of people in the New Hampshire exit polls rated the economy the most serious issue, and over 43 percent said their livelihoods had suffered since George W. Bush was elected?
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