October 08, 2004,
Job creation continued at a moderate pace with the announcement Friday that 96,000 non-farm payrolls were added to the economy. Measured over three-month periods, payroll gains have slowed from 295,000 in May to 103,000 through September.
The brightest spot in the Labor Departmentís 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 last Thursday before the Tuesday presidential election.
As for wages, average hourly earnings have increased by 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 payroll jobs have been lost. However, 1.69 million more people are working today according to the Labor Departmentís other jobs survey the household survey. Since the end of the recession in late 2001, 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.
In order 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 in order to get a better sense of the real new jobs number.
Once you do this, you see that 553,000 jobs have been created during the Bush administration. Since the end of the recession, this method leaves 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. Hopefully, President Bush will emphasize GDP in tonightís debate. During the ten recovery quarters since the end of 2001, real GDP growth has averaged 3.4 percent. Over the past four quarters since the supply-side tax cuts legislated in the spring of 2003, real economic growth has jumped to 4.8 percent.
Whatís more, personal income is growing at 5 percent over the past year. This measure includes wages, salaries, rents, interests, dividends, and Social Security payments. Like GDP, it is a comprehensive measure of the economyís progress, especially in terms of individuals and families. Adjusting for inflation, real income has increased 2.6 percent over the past year. Adjusting for taxes, real income has grown 1.6 percent. Total compensation, which reflects wages, salaries, and non-cash and non-taxable benefits like healthcare, has grown 3.9 percent (adjusted for inflation) over the past year.
These are all solid numbers. They show a healthy and growing economic prosperity. Bush should use them in this eveningís debate.
John Kerry, as we know, has a fondness for Europe. But their GDP is growing by less than 2 percent. Their unemployment rate is close to 10 percent, compared to only 5.4 percent in the U.S. Surely we do not wish to Europeanize the American economy.
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 thrown at us, such as a busted technology bubble, massive corporate scandals, the 9/11 attacks, two wars, and more recently an oil-price shock. With all that, the U.S. economy is growing almost four-times faster than Europeís, with an unemployment rate that is only half what it is on the other side of the pond.
Hopefully Bush will hammer all these points home in this eveningís debate.
Larry Kudlow, NRO's Economics Editor, is CEO of Kudlow & Co. and host with Jim Cramer of CNBC's Kudlow & Cramer.