- The Washington Times - Monday, November 10, 2003

Based on the Labor Department’s unemployment report for October, which was issued Friday, the jobless recovery has apparently ended and a job-creating expansion is now in place. Coupled with the economy’s accelerating growth rate, the improving labor market provides additional reasons to believe that a solid recovery has finally taken off.

The good news for October was that the expanding economy generated a net increase of 126,000 jobs. In addition, the nonfarm payroll employment figures for August and September were revised upward by 76,000 and 144,000 jobs, respectively. Thus, after declining each month from February through July, employment increases during each of the past three months.

Meanwhile, the unemployment rate, which reached its cyclical peak at 6.4 percent in June (19 months after the end of the 2001 recession), has ratcheted downward in recent months, falling to 6 percent in October. In terms of the political impact of unemployment, most analysts agree that the trend in the unemployment rate is more important than its level. Thus, it is noteworthy that the timing of the current downward trend contrasts sharply with the aftermath of the previous recession, which occurred during the presidential term of Mr. Bush’s father. Then, the unemployment rate peaked in June 1992, 15 months after the 1990-91 recession ended and five months before the president’s father lost his re-election bid. In the current cycle, the unemployment rate appears to have peaked nearly a year and a half before the presidential election. And there is good reason to believe that it will continue to trend downward.

Earlier last week, the Commerce Department reported that the economy roared ahead at an annual rate of 7.2 percent during the third quarter. Even more encouraging was the fact that this solid growth rate was broad-based. Consumption increased by 6.6 percent; business investment jumped by 11.1 percent; and exports, probably signaling a synchronized world-wide expansion, increased by nearly 10 percent.

If today’s robust expansion can maintain a pace that is strong enough to knock a quarter-percentage point off the unemployment rate each quarter over the next four quarters, the unemployment rate will be 5 percent on election day next year. It will have fallen by nearly 25 percent since its peak. Also, it would be more than 2 percentage points lower than the prevailing rate when Ronald Reagan won re-election in a landslide after unemployment plunged from its postwar peak of 10.8 percent, which was reached 24 months before the 1984 election. A 5 percent unemployment rate would also be lower than the 5.4 percent rate on Election Day 1996, when Bill Clinton easily won re-election.


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