By Kevin Harris
Issuing forecasts on any economic topic can be tricky, especially when the numbers in question concern a politically charged issue like the pace of U.S. job growth. The Bush Administration is learning that lesson the hard way, as the 2004 Presidential election year kicks in.
Witness the footwork on display Feb. 18, when White House Press Secretary Scott McClellan said the 2.6 million rise in jobs predicted in the latest Economic Report of the President, released earlier in the month -- a number widely questioned by the financial media and Wall Street -- was "based on the data we had at the time." He noted that the data were already old when the report was released and that forecast was "put together through modeling at that point in time."
When asked whether the White House would stand by the 2.6 million new-jobs forecast, McClellan responded that neither he nor President Bush is a "statistician," and that productivity gains could mean job growth falls short of the 2.6 million forecast.
Ouch. Employment is a critical economic factor for voters in an election year -- especially this year. That's because, despite rapid growth in output and profits, employment has grown in very few months over the past three years. Indeed, the benchmark nonfarm payrolls figure was down 35,000 year-over-year in January.
Clearly, the Bush camp's forecasts were well on the sunny side of the street. The median estimate of economists in the widely followed Blue Chip forecast is 166,000 new jobs per month in 2004, while the median estimate from the National Association of Business Economists looks for roughly 143,000.
Bush's economic report doesn't go into predictions of job growth by sector, but factory employment in particular is likely to remain a key issue of the 2004 campaign. The biggest anticipated concentration of "swing states" is in the Midwest, where industrial employment has been hit hard during the slowdown. A healthy improvement in factory-sector orders and output has not been enough to prompt net factory hiring. So far, a slower pace of layoffs and an improvement in temp hiring are the main labor market manifestations of brisker activity.
FEWER JOB LOSSES.
And while headline numbers from factory data released on Feb. 17 were favorable, the underlying news for factory employment was less than stellar. Industrial production rose 0.8% in January, but factory output was up just 0.3%. (Utility output accounted for a good chunk of the overall gain.) No pace of factory output rise can be matched with a factory job gain right now -- factories have had no job gains since July, 2000.
On the positive momentum side, the job loss associated with a given factory output gain seems to be slowing. In the fourth quarter of 2003, an average 0.43% monthly factory output gain was associated with an average 19,000 monthly decline in factory jobs. In the third quarter, a 0.46% average rise in factory output matched a 46,000 average loss in jobs.
The bottom line: Factories seem to be finding fewer jobs to shed. That's hardly reason for rejoicing, given daily announcements of more factory job "offshoring," but it may be the best anyone can hope for at the moment.
The Bush Administration is also dealing with the fallout from another jobs-related political storm created by remarks earlier in the month from the President's economic adviser, Gregory Mankiw, about the economic benefits of outsourcing jobs. Team Bush can prepare for only greater scrutiny of its pronouncements on the employment picture as the Administration's job-creation record moves front and center in the Presidential election campaign.
Harris is chief economist for Informa Global Markets
Edited by William Andrews