- The Washington Times - Friday, July 2, 2004

Contrary to the consensus estimates of economists, who projected payroll growth of 250,000 jobs in June, actual job creation decelerated sharply last month. The U.S. economy added only 112,000 nonagricultural jobs in June, while the unemployment rate held steady at a respectable 5.6 percent. Notwithstanding what apparently represents a temporary slowdown in job expansion last month, the evolving labor market has been exhibiting several favorable trends over the past year, both economic and political.

Monthly job creation during the second quarter, for example, averaged 260,000. That was more than twice the 122,000 jobs created on average during each month of the first quarter. Also, it was more than four times the monthly rate of job creation during last year’s fourth quarter.

In addition, the unemployment rate, which had reached a cyclical peak of 6.3 percent in June 2003, has fallen about three-quarters of a percentage point over the last year. Interestingly, the 5.6 percent rate in June is actually lower than the June 1972 unemployment rate, which preceded Richard Nixon’s landslide re-election. Perhaps more importantly, the current unemployment rate’s downward direction correlates strongly with previous trend lines that yielded political success. Rising unemployment rates, on the other hand, generally produced political setbacks.

Thanks in part to ballot-box shenanigans, Nixon narrowly lost to John F. Kennedy in 1960. However, had the nation’s unemployment rate not risen from 4.8 percent in February that year to 6.1 percent on election day, the number of votes the Democratic machines in Texas and Illinois would have had to steal to put Kennedy over the top would probably have exceeded even their considerable talents at ballot-box thievery. In 1976, Jimmy Carter just barely defeated President Ford; that may not have happened if the unemployment rate, which had been falling from May 1975 to May 1976, had not reversed direction and jumped nearly half a point before Election Day.

In 1980, the unemployment rate on election day was more than 1.5 percentage points higher than it was one year earlier, contributing to Ronald Reagan’s victory. Mr. Reagan was re-elected in a landslide in large part because the unemployment rate in November 1984 was more than 3.5 percentage points lower than it was two years earlier. President George H.W. Bush’s 1992 re-election campaign was clearly hurt by the fact that unemployment peaked in June 1992, having risen more than 2.5 percentage points during the previous two years.

Despite the fact that the election-year November unemployment rate was below 4 percent, two Democratic incumbent vice presidents lost close elections in 1968 (Hubert Humphrey) and 2000 (Al Gore) in large measure because the incumbent Democratic presidents contributed so much political baggage that it overwhelmed the favorable economic climates.



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