Job Growth, Economic Growth, and Politics

American business has added hundreds of thousands of new jobs for two months in a row. The Labor Department reported 337,000 new jobs in March and 288,000 new jobs in April. Most analysts see this report as a clear indication that the steadily improving economy has finally begun to boost hiring by American firms.

Richard D. Rippe, chief economist at Prudential Securities said, "Employment has finally joined an array of other economic indicators in depicting strong growth." President Bush takes some credit for the hiring saying, "People are finding work in this economy. The tax relief we passed is working."

John Kerry, Bush's likely opponent in the upcoming presidential election, counters by focusing on the fact that the 130.9 million people on the payrolls is still nearly 1.5 million
below where it was when Mr. Bush took office. "Lets be clear," Mr. Kerry said, "We still have a long way to go to get American working again."

The Bush administration can point to the fact that the percentage of the adult population holding jobs increased to 62.2 percent in April from 61.1 percent in March. According to Chris Varvares, president of Macroeconomic Advisers of St. Louis, "You knew that if you had above-trend economic growth into this year that the jobs would come back, and they have." According to the Labor Department report, employment has risen in health care, restaurant work, architectural services, real estate, mortgage banking, landscaping, building material stores, and construction.

Kerry supporters, on the other hand, can report on the slack in the labor market. The unemployment rate has not declined significantly - it has hovered around 5.6 or 5.7 percent since December. Wage growth has also been weak and has not kept pace with inflation. Finally, the long-term unemployed - those who have been looking for work for 27 weeks or more - are still at a historically high 22 percent of all unemployed persons.

Especially in a presidential election year, news such as new job growth will be interpreted to the benefit of political parties through intense political rhetoric and debate as to just how good it is. Such debate is likely to be laced with "normative economics" - economics based on value judgments or how things "ought" to be.

(Updated July, 2004)