Modest Employment Growth as Kudlow Nips at the Korbel
The latest employment report shows payroll employment rose last month by 157 thousand to close 2004 at 132,266,000. This figure is slightly less than the 132,441,000 reported for December 2000. The report also shows the unemployment rate staying at 5.4%. It seems that noisy household survey show a 137,000 decline in reported employment but the labor force participation rate retreated to 66.0%. This rate was 67.0% in December 2000. BLS also reports that the employment-population ratio was 62.4% where it has hovered for the past year. In December 2000, the employment-population ratio was 64.4%.
Bottom line is that employment growth for 2004 was just enough to keep pace with population growth and not enough to reverse the lackluster performance for the prior three years. A week ago as we were all preparing for our New Year’s celebrations, Lawrence Kudlow must have started on the Korbel a bit earlier as he wrote this NRO oped:
The most comprehensive measure of economic health — inflation-adjusted gross domestic product — has been trending steadily around 4 percent for the last two years. This is half a percent above the nation’s 3.5 percent long-run growth trend. Meanwhile, the unemployment rate — which used to be the key election-year labor-market indicator — moved down from 6.3 percent to 5.4 percent, indicating strong U.S. work conditions. Then there’s the 2 percent inflation trend, a stat never mentioned during the campaign but a long stone’s throw from Jimmy Carter’s 15 percent rate of price increases. Big media let Kerry get away with murder as he obsessed over non-farm payroll jobs, which were slow to recover but have in fact expanded by over 2 million in the past eighteen months. Nonetheless, the other major jobs report — the household survey — went virtually unreported. The household measure shows a 2.5 million jobs gain during Bush’s first term and a whopping 4.2 million increase since the end of the 2001 recession. It’s a real measure, too: It gives us the unemployment rate. It also does not triple-count job gains or losses, as is the case with the payroll survey, while it does include self-employed workers and independent contractors, key parts of our new Internet-based information economy.
As far as the household survey being a real measure, I wish Larry would read the footnotes noting that one should not compare across years given the way this survey data is compiled. As far as the unemployment rate – two facts Larry seems to omit: (1) the 5.4% is higher than the 3.9% just before Bush took office; and (2) the drop in the labor force participation rate means that the employment-population ratio fell by more than the unemployment rate increased. And yes, real GDP growth has been slightly above this 3.5% long-run trend for the last couple of years but couldn’t Larry tell NRO readers that over the entire four year period, real GDP growth has averaged only 2.5%? What is Larry trying to tell his readers? That the 2003 tax cut worked wonders? But he forgets to mention that 2001 tax cut, which he predicted would lead to incredible economic growth.