April 1, 2005 | WebMemo on Economy
The Bureau of Labor Statistics today released monthly job numbers for March, showing the economy adding more than 100,000 new payroll jobs and lowering the unemployment rate to 5.2 percent. Despite higher oil prices, higher interest rates, and higher trade deficit, unemployment is lower - dropping by 0.2 percentage points. Nobody should doubt the health of the American workforce.
While most attention will be given to the "decline" of payroll job growth, we should also notice the impressive rise in the alternative Household survey. Nonfarm payrolls are up "only" 110,000, but the number of Americans who are employed surged up 357,000. The household survey may be more volatile, but is not revised every month like payroll data, and serves as a better indicator over the long run. For example, the 262,000 payroll jobs added in February were revised down to 243,000 this time.
Twenty-one consecutive months of payroll job growth adding up to an additional 3.1 million jobs since the spring of 2003, coinciding with over a full one-point drop in the unemployment rate from 6.3 in June 2003 to 5.2 today, should give pause to the doomsayers. For context, the labor force did not grow by much according to the March employment report, and the labor force participation rate was unchanged at 65.8 percent for the third month in a row. That means the rise in employment and decline in the unemployment rate are very, very real phenomenon, not an artifact of people leaving the labor force. The fact is that more Americans are working today than ever before in U.S. history.
Public Policy Implications
These employment trends imply that fiscal and monetary policy over the last few years has been effective, at least in the short term. There are real concerns that monetary policy has been excessively liquid, yet inflation is the primary indicator to watch for that, and it seems stable for now. On the other hand, the Republican tax cuts of 2001 and 2003 seem to have been impressively effective at stimulating investment-driven GDP growth, which has translated into job gains. While challenges to American growth merit attention, especially the borrow-and-spend addiction of Congress, the economic trends are what you might call boringly positive.
For policy-makers, the strong economy should enable real reform of the long-term structural challenges facing the U.S., quite unlike the short-term stimuli popular in recessions. Indeed, there may never be a better economic environment for substantive entitlement reform. Congress should seize the opportunity.
Tim Kane, Ph.D., is the Bradley Research Fellow in Labor Policy in the Center for Data Analysis at The Heritage Foundation.