June 4, 2004
What's Really Behind Stronger Job Growth
Here’s a story that has no political content whatsoever: the U.S. economy added 248,000 new payroll jobs in the month of May. For the third straight month employers nationwide grew their payrolls at a very brisk pace, pushing the memory of sluggish job growth further behind us. Coupled with revisions to previous data made by the Bureau of Labor Statistics, the May report puts average job growth since March at a blistering 315,000 jobs per month, far faster than any time since the recovery began.
Of course, the statement about political content was made tongue-in-cheek. In the polarized political environment we inhabit today, the jobs report has become supremely political, both in Indiana and for the nation as a whole. Incumbents smile and take credit for the good news and run away from the bad. Perhaps we’d really like to believe that political leadership is the driving force piloting our economic ship ahead. It’s nice, after all, to have someone to thank or blame for whatever turn our economic fortunes take.
But to say that it has been the President’s leadership that has created almost 1.4 million jobs in the U.S. economy since last September, or destroyed 2.7 million jobs in the two years prior to that point, is nonsense. It has been the collective investments and gambles on the future carried out by millions of capitalists – both here and abroad – that have produced those outcomes. And if we are really concerned about our future economic well being, we’d be wise to pay attention to what the private sector is up to, and less on what today’s poll numbers are showing.
The May jobs report has plenty of good news, unless, perhaps, you are a bond trader. The robust, broad-based recovery in the economy that shows in the report on hiring makes it almost certain that the Federal Reserve will relent and let interest rates rise from their very low levels soon.
Certainly the news for manufacturing has been upbeat. Strong orders, both domestically and abroad, have fueled a modest rebound in hiring by long-suffering durable goods manufacturers in particular. The nearly 100,000 new factory jobs created since October is the strongest signal received to date that the transition from cost-cutting to output expansion is fully underway.
But they’ve not been alone in their good fortune. Construction, finance, retail andprofessional services have also been adding jobs at an increased pace since the winter snows melted.
Particularly heartening has been the turnaround in temporary help services hiring, whose employment stands 14 percent higher today than in April of last year. That’s because temp jobs frequently lead to more permanent job creation, just as the elimination of temporaries is the first sign of future job cuts.
Why are these strong job gains occurring only now, six months after Gross Domestic Product registered a white hot 8.2 percent growth spurt, and almost two and a half years after the end of the recession was officially declared? That’s a question we’re only beginning to get a handle on. Certainly the ailing balance sheets of many companies accelerated a restructuring that eliminated a lot of jobs and hit areas like the Midwest very hard.
But new research also paints a picture of an economy still suffering from a hangover from late 1990’s overinvestment in equipment, particularly in communications and technology, dragging well into this decade. The recovery and rebound in investment, a small but vitally important piece of overall spending, is only twelve months old, yet its resurgence has quickly added to payrolls as nothing else has. Think of that the next time you thank or blame a politician for what the monthly job tallies show.
About the Author
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