- The Washington Times - Saturday, January 11, 2003

The year-end setback in the economy was worse than thought, with a loss of nearly 200,000 jobs in November and December, the Labor Department reported yesterday.
Retailers hired fewer workers for the Christmas season, while airlines and manufacturers continued to slash jobs, overwhelming small increases in services employment within health care, business and government. Employers also cut back on hours, causing a drop in take-home pay that hit consumer spending.
The White House, wary of the loss of nearly 1.6 million jobs since 2000 as a result of the economy's slow recovery from recession, this week rushed through Congress a $7 billion extension of unemployment-compensation benefits to help sustain more than 8 million jobless workers.
Yesterday, Vice President Richard B. Cheney cited the pressing need for jobs in urging Congress to redouble efforts to pass legislation that will spur businesses to start hiring again.
While acknowledging the difficulty of accomplishing that goal, he asserted that President Bush's proposed mix of accelerated income-tax reductions and investment-tax cuts should help create 2.1 million jobs in the next three years more than making up for the jobs lost during the recession.
"The government does not create wealth and it does not create jobs, but government policies can and should create the environment in which firms and entrepreneurs will take risk, innovate, invest and hire more people," he said in a speech before the U.S. Chamber of Commerce.
Mr. Cheney noted many of the tax cuts are aimed at small businesses, which historically do the most hiring in the United States. He cited private analyses projecting the plan will help create about a million jobs a year.
Independent groups as varied as the Manufacturers Alliance, Bear Stearns & Co. and the International Monetary Fund agree that the plan should help restart the engines of job growth. But many analysts also say that high taxes are not the principal obstacle to growth right now.
"A jobless recovery could continue," said Sung Won Sohn, chief economist with Wells Fargo & Co. "The combination of geopolitical and economic uncertainties is holding back employment."
The biggest cloud obscuring the outlook for business hiring, he said, is the belief that the United States soon will enter a war of unknown duration and severity with Iraq.
A sudden pullback by consumers likely in the case of war would devastate businesses that are gearing up to expand and hire. As a result, most companies are hunkering down and waiting to see what happens.
"Until and unless a closure to the Iraqi situation is achieved, businesses' caution will continue," Mr. Sohn said.
The range of potential outcomes from a war is extreme, according to Wells Fargo. If it is prolonged, undermines confidence and drives up oil prices, it would provoke another recession. But a quick and successful war might cause a plunge in oil prices that actually would stimulate growth.
The most likely outcome, Mr. Sohn said, is the economy will continue to plod along with anemic growth and little hiring.
John E. Silvia, chief economist with Wachovia Securities, agreed that "stimulus would not be enough unless the uncertainty of war is removed. The latest employment data suggest an economy short on confidence."
Employers eliminated 88,000 jobs in November and 101,000 in December. The unemployment rate held at 6 percent.
Charles McMillion, economist with MBG Information Services, said Mr. Bush looks increasingly like he's in the same pickle as his father, former President George Bush, because the economic recovery so far has failed to benefit the unemployed.
"The Bush-2 jobless recovery is on exactly the same unique path as Bush 1," he said, except that manufacturing-job losses since 2000 have been almost twice as high as they were during the 1990-91 recession.
One big improvement over the slow recovery in the early 1990s is that worker productivity is much higher now. That has enabled businesses to keep increasing the wages of the 94 percent of American workers who still hold jobs, supporting growth in consumer spending, said Debbie Johnson of Prudential Securities.
"Consumer purchasing power is not suffering," despite the dearth of jobs, she said.
The administration's tax plan seeks to build on this strength by bolstering the take-home pay of working Americans. Economists say the income-tax cuts already played a key role in buoying consumer spending during the recession and first year of recovery.
Congressional Democrats continued to insist yesterday that their plan to provide one-time tax cuts to small businesses and households will do a better job of boosting economic growth and jobs while avoiding the buildup of huge budget deficits threatened under the Bush plan.
"The president has put forward another tax-cut proposal, which his own economists estimate will create just 92,000 jobs in 2003, fewer jobs than were lost over the last two months," said House Assistant Minority Leader John M. Spratt Jr., South Carolina Democrat.
"It provides very little stimulus to the economy in the short run, and in the long run, it drives the government's budget $674 billion deeper into deficit," he said. "It is hard to see how a mountainous national debt can help the long-run economy."

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