"Total employment in November grew by 483,000 to 140.3 million, and the employment-population ratio…edged up to 62.5 percent." - The Employment Situation Report, Friday, December 3, 2004, p. 1
Today's job report
issued by the Bureau of Labor Statistics is still more evidence of
an expanding economy, with job growth exceeding 100,000 for the
fourth straight month. But that only counts payroll jobs, and
non-payroll jobs grew by an extra third of a million.
President Bush will start his second term with an economic
tailwind instead of the headwind that greeted him when he first
took office. This matters for policy because a strong economy will
enhance the opportunity for principled entitlement and tax reform,
whereas a weak economy focuses all policymakers on crude stimulus
- 112,000 payroll jobs were added, almost all in the service sector. In 2004 so far, over 2 million net payroll jobs have been created.
- The gap between payroll and household survey estimates grew vastly wider this month, reinforcing doubts about payroll sample quality issues and perhaps explaining why forecasters' expectations for payroll growth were not met.
- The unemployment rate declined slightly to 5.4 percent, the sweet spot where it has held steady for most of late 2004.
The lament that
George W. Bush will be the only President since Herbert Hoover to
lose jobs is looking increasingly ill-founded, even if one uses the
problematic payroll survey as the measure of jobs. Compared to
January 2001, when Bush was sworn in, there are 313,000 fewer
payroll jobs, but there are still two reports left before the first
term closes. Payroll growth has averaged 185,455 jobs per month
during 2004, which implies that Bush will have gained net jobs
during his first term when all reports in and all revisions are
Payroll-Household Divergence Continues
The real stunner
in the jobs report is the gain of 483,000 jobs in the household
survey in November alone. The payroll survey's sample quality
problems make the household survey a better measure of long-run
trends. For example, there has been a net gain of 2.4 million
employed Americans on the President's watch, according the Census
survey. The fact that there have never before been so many working
Americans will probably escape mainstream media coverage, which
continues to focus on the unreliable preliminary payroll numbers
for headlines and whether or not payrolls met expectations. But
expectations of forecasters are not relevant to the economy's real
health, whereas the actual labor market remains impressive while
setting new employment records.
signals also suggest continued expansion. One key example: The
number of Americans receiving unemployment insurance continues to
dwindle. Weekly initial jobless claims that are below 400,000
signal a strengthening economy. This week, the four-week moving
average is 336,500, down slightly from October's final week and the
lowest level in three and a half years. Continuing claims ended at
2.72 million in November, down from 3.3 million at the start of the
Economic Tailwinds Help Reform Efforts
The continuing good employment news is precisely what should be expected given the strong GDP growth rates for the past three years. Prospects are very bright for a booming economy in 2005, and the political implications of strong job growth, low inflation, and strong GDP growth in 2005 are profound. Reform of Social Security and the federal tax structure may never again have such a favorable environment.
The primary economic concern of all policymakers during the President's first term was ensuring a quick recovery from the 2001 recession. Now Congress should seize the opportunity to reform Social Security and America's burdensome tax code. These reforms will leave a legacy of economic solvency and prosperity for the President and the 109th Congress.
Alison Acosta Fraser is the Director of, the Thomas A. Roe Institute for Economic Policy Studies, Tim Kane is a Research Fellow, Center for Data Analysis and Rea Hederman is a Senior Policy Analyst in the Center for Data Analysis at The Heritage Foundation.