Payroll jobs beat all expectations in March, rising by a spectacular 308,000. Upward revisions for January and February put the three-month rise from December to March at 513,000, an average gain of 171,000 jobs a month. The March increase was the seventh monthly rise in a row.
Coupled with an array of other economic statistics, almost all pointing upward, the payroll numbers carry the promise of a sustained expansion in the job market in the months and quarters ahead. The recent pickup in jobs will likely notch up economists’ consensus forecast of economic growth this year to the 4 percent to 5 percent range.
There will be only six more monthly employment reports before the Nov. 2 presidential election. The last of the six will be on Oct. 8, reporting the job numbers for September. (The October data won’t be released until Nov. 5, three days after the election.) Opinion polls tell us the public’s No. 1 concern is jobs and the economy. How many new jobs are created in the next six months could well decide the election’s outcome.
What the employment situation will be come Election day, no one can say. But we can ask, what if?
What if the current uptrend in jobs sputters out and turns negative? With George Bush and John Kerry close in the polls, the advantage would surely go to Mr. Kerry. However, economic indicators say a resumed job loss trend is unlikely.
What if the recovery in nonfarm jobs in the past three months continues at the same pace for the next six months — what will the labor market and unemployment look like at election time?
Alternatively, what if payroll jobs pick up steam and rise at a rate consistent with the 1990s expansion of about 250,000 a month?
Both job rise scenarios are consistent with consensus forecasts of economic growth and a slowing in the recent high productivity growth, with a more pronounced slowing in output per hour in the second scenario. The jobs assumption in the first scenario is modest by historical standards, while the second is more robust but realistic in terms of past experience. Under both scenarios, labor force growth would pick up in response to the jobs increase.
The first scenario projects a 1 million rise in payroll jobs by September. Allowing for labor force growth, and adjusting the job numbers to a total civilian employment basis to be consistent with the definition of civilian unemployment, this scenario yields a lower unemployment rate in six months, though only about 0.2 below the current 5.7 percent.
The second scenario projects September jobs to be 1.5 million higher than last month, many of which will be absorbed by an expanding labor force. Nevertheless, employment gains of this magnitude will be strong enough to more than offset growth in the work force and could lower the jobless rate by as much as a half point.
It’s uncertain to what extent voter expectations on Election Day will be satisfied by the results of the first scenario. Though employment may be higher and unemployment lower than today, will the difference be enough to allay voter apprehension about jobs? Whether Republicans or Democrats will gain more by this outcome could be a toss-up, with a possible lean toward Mr. Bush.
The stronger job market described by the second scenario would assure voters and would undoubtedly accrue to the benefit of the president, so long as interest rates and inflation are not deemed threatening. It’s an outcome that requires a well-behaved and optimally performing economy.
Under either scenario, payroll employment would still be below its pre-recession peak and less than when Mr. Bush took office, a fact Democrats won’t let us forget. Though voters have long memories on pocketbook issues, what’s happening lately will carry the most weight at election time.
It will matter more to voters to feel secure about the job situation on Nov. 2 than to be reminded the job count is lower than at the beginning of the Bush term.
Alfred Tella is a former Georgetown University research professor of economics.
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