The economy is voting for Bush

Larry Kudlow
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Posted: Dec 07, 2003 12:00 AM

The November report for headline job creation may not have been quite as strong as expected, but the fine print inside the government release still carried plenty of good economic news -- which is not so uncommon these days. Indeed, with each new piece of rising economic data, one thing is becoming increasingly clear: This booming economy is voting for Bush.

While it's true that big corporations are still cautious about new job hires, the fact remains that more and more people are entering the workforce. Employment as measured by the Labor Department's household survey counted 589,000 newly employed workers in November, following October’s robust rise of 441,000. This measure has increased in three of the last four months by a total 1.1 million. It's why the unemployment rate has dropped to 5.9 percent from its 6.4 percent peak.

In fact, the household survey now shows that 757,000 more people are working today than in January 2001. The media may rant about big job losses during the Bush presidency, but the much different reality is that three quarters of a million more people have gone to work during the president's first three years -- which included a recession he inherited from the prior administration.

Part of this misinformation problem may be that the job-watchers in the media are not tracking all of the jobs. In the innovative 21st century information economy, it's the ranks of the self-employed that are surging. In November, for example, 156,000 new self-employed workers showed up. This sector has gained in five of the last six months by a total of 517,000, strongly implying that the labor market is healthier than the headlines suggest. When you add the number of new self-employed workers to the new payrolls in the corporate workforce, you get a total of 213,000 new jobs in the economy for the month of November.

Not only is this more proof that the "jobless" recovery is in good part myth, but it represents a cultural change inside the economy. Self-employed entrepreneurs are replacing the old-line corporate establishment. This is a transformation of America's jobs profile, and its being enabled by President Bush's significant tax cuts on small businesses and their investments.

As for the Labor Department's business-establishment survey -- which tracks old-line corporations and doesn't properly identify the new economic culture -- non-farm payrolls increased by 57,000 in November. That's not all that bad. It's the fourth consecutive rise for non-farm payrolls, bringing the total jobs-gain since July to 328,000. Meanwhile, hours worked and overtime also increased last month.

Importantly, temporary-worker payrolls have increased for seven straight months by a total of 166,000. This traditional leading indicator projects nearly 100,000 new private jobs in December and at least 750,000 in the first quarter of next year.

For some reason, the dollar fell on this good employment news. But not even an incredibly strong report on factory orders (non-defense capital-goods orders jumped 34 percent at an annual rate over the past three months) could halt the dollar’s falling momentum. Nor could the president’s decision to end steel tariffs (although this was a strong pro-growth move on its own merits). Nor could the incredibly positive reports on productivity, profits, and manufacturing.

But the undervalued dollar is really Europe's problem, not ours. If they wish to sink their economy with an overvalued and deflationary euro, let them.

Of course, the Federal Reserve could help stabilize the dollar by changing its policy position on the overnight interest rate, which it intends to keep low “for a considerable period.” The Treasury Department could also send a strong dollar signal with a well-timed exchange-market intervention. But still, when you step back a bit, it becomes clear that there is no real dollar crisis.

In the last four years, a broad dollar index of 30 currencies around the world swung up by roughly 10 percent and then back down by the same amount, leaving the dollar essentially unchanged in that period. And recent increases in gold and commodity prices have more to do with the stockpiling of raw materials, finished goods, and precious metals from the China boom than any excess money from Greenspan & Co.

The Fed is doing its job by properly accommodating President Bush’s supply-side tax cuts on capital formation, which will continue to grow the economy near the 5 percent average rate of the past two quarters. Outsized productivity gains, stronger-than-expected profits, surging investment in capital goods, and accelerated job creation will all result from higher after-tax capital returns and lower capital costs.

All of which seems very unfair to the Democrats: With each new piece of positive economic data, a second Bush term becomes more and more of a foregone conclusion.