Out Of Work, Out Of Sight

Unemployment job employment figures
CBS/AP
A falling unemployment rate may be spurring President Bush's prospects for reelection, but it is masking millions of Americans who do not have full time jobs, a newspaper reports.

The Los Angeles Times reports that while the nation's unemployment rate of 5.9 percent is relatively low, it fails to include the 4.9 million people who want full-time positions but are working part-time jobs. The figure also omits 1.5 million people who have stopped looking for work.

Taken together, the total number of jobless reaches 15.1 million — or 9.7 percent, up from 9.4 percent a year ago, the Times reports.

The number is unlikely to fall very fast, very soon. While forecasters believe things are falling into place to produce the strongest economic growth in two decades, analysts believe there will be much less improvement in unemployment as businesses concentrate on boosting productivity so they can expand output without hiring new workers.

For that reason, the current jobless rate of 5.9 percent — down from a high this summer of 6.4 percent — is expected to still be around 5.7 percent when America votes next November.

That despite the fact that many analysts believe the overall economy, as measured by gross domestic product, will expand next year by 4.6 percent or more, the biggest gain since 1984, when another Republican president, Ronald Reagan, was running for office.

The sustained recovery should translate into job increases of 100,000 or more per month, which would translate into at least an additional 1.2 million more jobs next year, the first positive year for job growth since 2000.

But since the recession began in March 2001, the country has lost 2.35 million payroll jobs.

And in a significant change from past downturns, workers who lost their jobs have stayed unemployed far longer. The proportion of unemployed workers who have been without a job for more than six months hit 24 percent in November, a 20-year high, which Bush's Democratic opponents contend is evidence of the president's mishandling of the economy.

One architect of Mr. Bush's economic policy, former economic adviser Larry Lindsey, predicted growth over 4 percent and job gains of 150,000 to 200,000 a month.

"What we've seen is the recovery of profits. Whether you like them or not, profits are necessary before people turn around and invest and before people are hired in new jobs," Lindsey told ABC program on Sunday.

Robert Reich, labor secretary in the Clinton administration, responded that the nation hasn't seen anything close to the job creation Lindsey forecast. "This has been the most anemic jobs recovery we've seen in recent American history," Reich said.

A sustained upturn has been long in coming since the bursting of a stock market bubble in 2000 triggered the end of the longest economic expansion in U.S. history.

The decade-long expansion ended in March 2001; the decline deepened with the terrorist attacks that fall.

Just as the economy began to regain its footing in 2002, consumer and business confidence was shaken by corporate accounting scandals and then by uncertainties of the Iraq war buildup.

However, a third round of tax cuts, combined with the lowest interest rates in 45 years provided by the Federal Reserve, finally ignited stronger growth this past summer. This time, economists believe the recovery will not falter.

In addition to the boost from last year's tax cut and low interest rates, analysts are looking for economic strength from increased federal spending, which has soared in such areas as the war against terrorism.

The federal budget deficit is projected to hit a record $500 billion in 2004.

"Never bet against a politician's willingness to spend in an election year," said Diane Swonk, chief economist at Bank One Corp. in Chicago, who predicted that the economy in 2004 will not be the curse to Mr. Bush that the economy of 1992 proved to be for his father's re-election hopes.

David Wyss, chief economist at Standard & Poor's in New York, predicted GDP growth next year would hit 4.7 percent, in line with many private analyses.

Wyss and other forecasters believe the Federal Reserve will keep interest rates low most of the year despite stronger growth because inflation will continue to be a no-show. Many don't expect the first Fed rate increase until after November's election.

Of course, analysts caution that unforeseen developments, such as a surge in oil prices sparked by further conflict in the Middle East or a terrorist attack on U.S. soil, could make current forecasts wildly optimistic.

But if the forecasts turn out to be accurate, the private analysts believe the economy will help Mr. Bush's re-election chances.

"Bush's father made the mistake of having the recession a year too late so there wasn't enough time for the recovery to really get going in 1992," said Wyss. "The timing for the current president is almost perfect."