- The Washington Times - Sunday, October 7, 2007

ANALYSIS/OPINION:

Although the current economic expansion began in November 2001, the economy continued to shed jobs through August 2003. Many commentators described that period as the “job-loss recovery.” The economy finally began adding jobs in September 2003. Since then, the White House and congressional Republicans have been citing the cumulative number of jobs created since August 2003. Thus, August 2007 represented the end of the fourth year of the resumption of job growth.

Based on upwardly revised nonfarm payroll employment for August, which initially reflected job contraction, the uninterrupted expansion in monthly payrolls has continued through September. However, with the whiff of recession in the air, now seems to be a good time to review how employment and the economy have grown over the last four years and to assess how that performance compares with the four-year (1997-2000) and eight-year (1993-2000) periods that preceded the last recession.

From September 2003 through August 2007, the economy created 8.3 million jobs. Averaging nearly 174,000 per month, the cumulative increase in jobs totaled 6.4 percent over four years. By comparison, from January 1997 through December 2000, the economy created 11.5 million jobs. Averaging 239,000 jobs per month, the cumulative increase totaled 9.5 percent. Between January 1993 and December 2000, the Clinton administration created more than 23 million jobs (an average of more than 240,000 per month).

Including the eight-month recession that President Bush inherited and the job-loss recovery that lasted nearly two years after the recession ended, about 5.8 million jobs (an average of 71,400 per month) have been created during the first six years and nine months of the current administration. More than a quarter of those jobs (1.5 million) were added in the government sector, about three times the proportion of government jobs (8.3 percent) created during the Clinton years.

There is good reason to worry that the September unemployment rate of 4.7 percent is not as impressive as it appears to be. Today the labor force participation rate (66 percent) is measurably lower than its average (67.1 percent) during the 1997-2000 period. In fact, if today’s labor force participation rate were equal to the rate that Mr. Bush inherited in January 2001 (67.2 percent), then the current unemployment rate would be 6.4 percent, which is 1.7 percentage points higher than its reported rate. And instead of reporting that 7.2 million people were unemployed in September, the Labor Department would have reported an unemployment level higher than 10 million. That would have been 66 percent (and 4 million workers) above the level of unemployment in January 2001 (6 million).

During the four years that ended in June, the economy has grown at an average compounded annual rate of 3.1 percent, while growth during the last four quarters has fallen below 2 percent. Since Mr. Bush entered office, the economy’s average annual growth rate has been below 2.4 percent. By comparison, the economy expanded at a 3.9 percent annual rate over the 1997-2000 period and a 3.6 percent rate during the 1993-2000 period. Compared to previous economic expansions, the current one is below par. While an annual growth rate of 3.1 percent over the last four years (through June) is nothing to belittle, the circumstances underlying it would normally have generated a much more robust expansion. The average of the Federal Reserve’s targeted short-term (overnight) interest rate for the four years ending in June was actually below the average annual increase in the consumer price index (3.2 percent), confirming a very expansionary monetary policy. Meanwhile, budget deficits for the past four fiscal years averaged nearly $300 billion per year, which is very stimulative. Providing a stimulus for exports, the dollar has declined 20 percent from its early 2002 peak, according to a broad-based, inflation-adjusted, foreign-exchange index compiled by the Fed.

Now, with a whiff of recession in the air, even these subpar achievements in employment and growth are in danger of being reversed.

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