October 8, 2004 | WebMemo on Economy
There is no doubt in any economist's mind that the U.S. economy is growing strongly. But jobs are the ultimate pocketbook issue that affects voter perceptions. And there is real doubt, among economists and working Americans, about the number and quality of jobs that have been created since 2000.
When the monthly Labor Department report on the Employment Situation was published this morning, it was the last official view of employment in America before the 2004 elections next month. The unemployment rate held steady at 5.4 percent in September and the estimate of payroll jobs grew for the thirteenth month in a row. Today's report also included an announcement of the annual benchmark revision of payroll data. The new benchmark implies that the payroll survey has been undercounting by 236,000 jobs since March, but this correction won't be finalized and included in the payroll numbers until February.
Highlights of September Employment Statistics
The unemployment rate is the ratio of unemployed workers to the entire workforce. It does not count persons not in the labor force, and some critics contend that discouraged workers should be counted. Yet the alternative measure of underemployment that includes such discouraged workers actually improved in September and is now at 5.7 percent, within striking distance of the regular unemployment rate.
Alternative measures of underemployment that include discouraged and marginally attached workers tell the same story of a labor market that has rapidly improved since the President's 2003 tax cuts. Including all marginally attached workers, the rate was 6.4 percent in both August and September. This measure too has declined substantially since September 2003, from 7.1 to 6.4 percent.
The labor force has grown by 3.6 million since January 2001, not declined. Critics who want to focus on very slight declines in labor force participation rates or employment-to-population rates neglect to mention that these trends are largely driven by the decline in 16-19 year old participation, or that such measures are more likely to signal reductions in labor supply, not labor demand.
Unemployment is historically low and remains steady, while payroll jobs are on the rise. Far from becoming more discouraged, as some critics contend, American workers are, by the numbers at least, thriving. When all these factors come together-and add in the payroll survey's new 236,000 job benchmark bonus, as well-little fodder remains to fuel the complaints from critics of today's economy. Given the recession that followed the bursting of the dot-com bubble and the aftermath of the 9/11 attacks, there should be no doubt about America's impressive economic strength.
Tim Kane, Ph.D., is Research Fellow in Macroeconomics and Rea Hederman is a Senior Policy Analyst, in the Center for Data Analysis at The Heritage Foundation.