Job creation continued moving ahead steadily in the United States with Friday’s announcement that 96,000 nonfarm payrolls were added to the economy. Over the past 13 months, 1.9 million new jobs have been created. The unemployment rate stands at a historically low 5.4 percent. A new U.S. record of 140 million Americans are now working.
The brightest spot in the Labor Department’s September report is a 3.2 percent annual rate of increase for third-quarter hours worked. This is the strongest quarterly rise in seven years. It probably foreshadows 5 percent real GDP growth for the third quarter, a number that will be released on the Friday before the Tuesday presidential election.
At lower personal tax-rates, more people work and for longer hours to produce more. This is consistent with supply-side thinking that lower taxes enabling people to keep more of their earnings generate new incentives for greater work effort.
As for wages, average hourly earnings have increased 3.1 percent annually through September. This number has been steadily rising over the past year from a meager 0.8 percent increase registered in October 2003.
Since George W. Bush was elected president, 585,000 payrolls have been lost. However, 1.69 million more people are working today according to the Labor Department’s other jobs survey — the household survey. Since the late 2001 end of the recession, 908,000 new payroll jobs have been created, but 3.4 million more people have gone to work since then, according to the household survey.
The Bureau of Labor Statistics argues that, on a month-to-month basis, the household survey is more volatile than the establishment payroll survey. However, longer-term trends for the population survey are significant.
To put the two surveys on a more comparable basis, the BLS has adopted a methodology that removes self-employed workers from the household survey and also takes out the multiple (and redundant) job tallies in the payroll count. As a rule of thumb, it is useful to split the difference between the two surveys to get a better sense of the real new jobs number.
Once you do that, you see 553,000 jobs have been created during the Bush administration. Since the end of the recession, this method produces 2.2 million newly employed.
The Kerry campaign has defined the economy in terms of the weaker payroll survey numbers. But the most comprehensive measure of economic output is still the gross domestic product, adjusted for inflation. It is to be hoped President Bush will emphasize GDP in the remaining weeks of the campaign. During the 10 recovery quarters since the end of 2001, real GDP growth has averaged 3.4 percent, in line with its long-run post-World War II annual expansion average of the last 57 years. Over the last four quarters since the supply-side tax cuts legislated in spring 2003, real economic growth has jumped to 4.8 percent.
What’s more, personal income is growing at 5 percent over the past year. This measure includes wages, salaries, rents, interest, dividends and Social Security payments. Like GDP, it is a comprehensive measure of the economy’s progress, especially in terms of individual and family economic power. Adjusting for inflation, real income has increased 2.6 percent over the past year, a hefty gain. Total compensation, which reflects wages, salaries, and noncash and nontaxable benefits like health care, has grown 3.9 percent (adjusted for inflation) over the past year.
These are all solid numbers, showing a healthy and growing prosperity. Mr. Bush should use these data to rebut Sen. John Kerry’s silly charge this is somehow a Herbert Hoover economy.
Mr. Kerry, as we know, is fond of Europe, but the GDP over there is growing less than 2 percent. Europe’s unemployment rate is close to 10 percent.
Mr. Bush has nothing to be ashamed of. The resilient, durable, free-market U.S. economy, bolstered by supply-side tax cuts, has in fact delivered the jobs and the goods. This is especially remarkable in view of all the negatives in the mix, such as a busted technology bubble, a recession, massive corporate scandals, the September 11, 2001, attacks, two wars, and more recently an oil-price shock. Even with all that, the U.S. economy is growing roughly 3 times faster than Europe’s, with an unemployment rate half that on the other side of the pond.
Let’s hope Mr. Bush hammers all these points home in this evening’s debate.
Lawrence Kudlow is a nationally syndicated columnist and is chief executive officer of Kudlow & Co. LLC and CNBC’s economics commentator.
Please read our comment policy before commenting.