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By ROGER LOWENSTEIN - NYT MAGAZINE
If nothing else, John Kerry has revived the public's memory of Herbert Hoover. Again and again, the Democratic candidate has reminded people that George W. Bush has ''the worst record on jobs since Herbert Hoover,'' that Bush is in line to become the first president ''since Hoover'' to preside over a shrinking payroll, that he has ''stood by,'' Hoover-like, while the good honest folk who make up the backbone of the country have lost their jobs.
But if Hoover has come to mean a president who fiddled while people went jobless, Bush has been working overtime to repudiate the tag. Everything the president pushes, from limiting jury awards to expanding offshore drilling, he cloaks in the garb of creating jobs, and Bush's advisers have taken to boasting that, thanks to his tax cuts, America has two and a half million more jobs than it otherwise would. The more numerate Kerry, meanwhile, has unveiled a plan to create 10 million jobs; indeed, he has made that plan the centerpiece of his campaign.
An intelligent voter could be forgiven for thinking that the most important domestic consideration in the election is how many jobs the candidates would create over the next four years. And writers who in another season were buzzing over interest rates, or Monica, now swarm over the monthly jobs report as if it were a running report card on the president -- the Beltway equivalent of the stock market.
This mind-set has come to frame the way we think about virtually every economic issue, even those -- like the budget deficit -- that have little impact on employment. It has colored our sense of history, so that a reader of campaign news might reasonably conclude that Bill Clinton ''created'' 22 million jobs and that Bush first ''lost'' nearly 3 million and, then -- wonder of wonders -- won half of them back.
There is one problem with such thinking: virtually no one involved with presidential politics, and virtually no economist, believes it. Robert Barbera, chief economist at the brokerage firm of ITG/Hoenig, says that in his 30 years in the business, ''the notion that presidents create and lose jobs is the most grotesque mischaracterization of the economic backdrop'' that he has witnessed.
The emphasis on jobs is likely to intensify during the campaign's final weeks, especially given that in August the Bureau of Labor Statistics reported the weakest monthly job totals in a year. The news, predictably, was treated as if the president had taken home a D. So it is striking that neither Bush's economists nor Kerry's nor many who have served in administrations past really believe that job numbers are a reflection of presidential performance. Robert Reich, secretary of labor under Clinton, says bluntly, ''Job numbers are largely a function of population and the business cycle, and the business cycle has its own rhythm.'' Administrations should be able to improve the quality of jobs -- shorthand for raising both the requisite skill level and the compensation -- Reich argues, but the lead time is so great that presidents have little political incentive to try.
There are three problems with the breathless, scorecard approach to job numbers. First, most jobs are in the private sector, and the president is only one of many influences over whether a manager decides to hire or fire. Some of the others that come to mind: Alan Greenspan, the stock market, the strength of international economies, technological change, oil prices and the weather (try legislating that).
Another problem is that, assuming Washington does have some influence, attributing it to the appropriate officeholder is next to impossible. The labor market does not correspond to neat, quadrennial cycles, and the notion that the Bush team, which took office when the economy was already cooling, precipitated a decline in the job market that began 10 weeks later is simply implausible. Governmental decisions have a long half-life. The balanced budget achieved by Clinton in 1998 owed much to the 1990 budget agreement forged by the first President Bush, who had been kicked out of office as a failure. If you want to blame the current president for a recession, argues Jeffrey Frankel, a Harvard economist, blame him for the next recession, because the Bush deficits will seriously narrow the options available to whoever is unlucky enough to be presiding then.
The third, and most serious, flaw is that focusing on the number of jobs fosters a simplistic and illusory sense of what a president can do. It misdirects policy toward ''creating'' jobs, which are, if anything, an outcome of good policy rather than an end. As Randy Kroszner, a former member of the Bush White House Council of Economic Advisers, puts it, ''To think we have a magic lever, blue for jobs, red for growth, that's mistaken.'' His real point is that the levers are not, in the long term, distinguishable. Jobs result from growth -- from employers' desire to increase profits, not from their desire to increase payrolls. Countries that have tried to target jobs specifically -- say in Europe, by restricting the freedom of businesses to lay off workers -- have discovered an unpleasant paradox. Lessened flexibility in the labor market leads to more tentative hiring and fewer jobs.
Moreover, since the economy benefits when companies are able to produce more goods and services with fewer workers, maximizing the number of jobs is not always in society's interest. If it were, we would all have wonderful memories of the Carter administration, which recorded the fastest job growth of any president since the 1960's.
But we don't. Which means that job numbers are one, but only one, indicator of economic well-being. Productivity -- how much each job accomplishes -- matters, too.
There is no doubt that Bush has presided over some very bad stats. After peaking in March 2001, the number of Americans with jobs fell steadily for more than two years -- a period that encompassed a stock market plunge, the Sept. 11 attacks, three tax cuts, repeated easings of interest rates by Greenspan, the invasions of Afghanistan and Iraq and a recovery on Wall Street and in the economy. What hit the great American job machine? Even Kerry advisers admit to being puzzled. The 29-month drop, which didn't finally end until August 2003, was the longest, though not the steepest, decline since the Great Depression, when the president was -- you guessed it -- Herbert Hoover. Moreover, the ensuing rebound has been anemic.
In total, since the start of Bush's term, payrolls have shrunk by 1.1 million. Kerry advisers are quick to point out that the economy normally adds about 150,000 jobs a month, which over four years would total 7 million. Bush has yet to get to the starting line.
This was Kerry's theme when I caught up with him early this summer. He was addressing a rally in a high-school gymnasium in Massillon, Ohio, a depressed region in a battleground state that Bush carried narrowly in 2000 and that has been pounded by layoff notices since. The big news in Massillon was that the Timken Company, a steel and bearings manufacturer founded by a German-born inventor in 1899, had announced it would close a trio of plants in nearby Canton. As a symbol, Kerry couldn't have done better. Timken's chairman, Timothy Timken, is a major contributor to the Bush campaign. In 2003, while campaigning for his third tax cut, Bush came out to Timken and praised its workers and promised that his package would help ''create the conditions for job growth, so people can find work.''
Timken's announcement, which put 1,300 jobs in jeopardy, made Bush look foolish. It is absurd to think, as a Timken official tried to persuade me, that Bush's economic package had been the ''most appropriate'' one possible for Timken. Eliminating the tax on wealthy estates hardly helped its bearings plants. But the notion loosely floating about the gym -- that Bush was to blame for the shutdown -- is equally absurd.
One thing to understand about the job numbers is that while they squiggle around from month to month and year to year in response to what happens at companies like Timken, over the long term they tend to keep pace with the growth in the labor force. In fact, if you look at the 11 1/2 years of the Clinton and Bush II administrations as a whole, employers have added 21.5 million jobs, or 156,000 a month -- right in step with demographic trends. As Lawrence Katz, a Harvard economist working for Kerry, puts it, ''Labor markets have equilibrating forces.''
When presidents or the Congress try to do something for the economy, the most readily available lever at their disposal is the budget. However, in terms of its long-run effect on the job market, budget policy is overrated. The issues that consume politicians, like how to tailor a stimulus or which group to favor with a tax break, tend to affect the ''squiggle'' -- the short-term job numbers -- but not much more. To influence the long-term makeup of the labor force, what matters is how the money is spent (on retraining, for instance), not whether the government taxes or spends a little more or a little less.
he gym in Massillon was packed with people in union T-shirts: firemen, painters, nurses, steelworkers. A banner depicted working people in various trades: carpentry, construction, manufacturing. Save for the lone image of a worker at a computer terminal, it was as if the 21st century hadn't arrived. ''If Bush gets another term, this country won't have any jobs left,'' a woman in the bleachers told me.
Kerry spoke to the crowd, town-meeting style, from a stool near one of the baskets. He started on what he hoped would be an empathetic note. ''Your stories are the thread of my life. As I go in and out of your living rooms, as I travel across this country. . . .'' It fell flat. Then he switched gears: ''My goal is to put people to work.'' A cheer went up. ''I don't have to tell you what has happened to jobs in Ohio!''
Anti-Nafta signs dotted the gym, and Kerry delicately maneuvered around the issue of trade. He admitted, courageously, that he couldn't promise to hang onto every job that goes overseas. Switching gears again, he exclaimed that he had heard from workers whose last assignment had been to ''pack their equipment into crates and ship them to China'' and that this would ''never'' happen under a Kerry administration. Big cheer.
Then Kerry described how he would ensure this -- his plan for 10 million jobs. The central points include subsidizing health care, tightening the tax treatment of U.S. companies that operate overseas, reducing the general corporate tax rate and giving manufacturers and firms affected by outsourcing an incentive to hire. How does that add up to 10 million? Actually, it doesn't. Kerry's ''plan'' isn't an industry-by-industry summation; it's simply a forecast, based on population trends, for what will occur in the labor force if the economy returns to health. Any economics student could have come up with that number or with some other one.
I asked the company how many jobs the Kerry plan would save. ''It's a wrongheaded approach,'' Robert Lapp, a vice president for government affairs, responded. ''Companies are created to supply a product or a service that somebody wants -- [not] to supply jobs.'' O.K., so Lapp's boss is Bush's buddy. But others -- officials at the United Steelworkers local, Wall Street analysts -- confirm that the employment picture at Timken is more complicated than the simple layoff story suggests. For one, Timken isn't cutting jobs overall. It has added jobs at some locations and cut them elsewhere. (Timken has 42 plants in the United States in addition to operations overseas.) The Canton facilities are simply the dinosaurs of the lot. They are old and inefficient, and the workers earn more than those at competitive plants. Average pay is just above $50,000 a year, plus full health care coverage.
So, ever conscious of Wall Street, Timken is going to make its bearings at other, more efficient, plants (mostly, but not entirely, in the United States). When you boil it down, Timken's policy seems to be that the Canton jobs shouldn't be saved, at least not if Timken can't wring some serious concessions from the union.
As hard-hearted as that sounds, it's a pretty good microcosm of what's happening in the U.S. economy: some jobs being lost; some other ones, perhaps for the moment lower-paying ones, being gained. (The evidence on how good the new jobs are is inconclusive.) But despite the gloomy headlines, America has not been losing jobs at an unusual rate. The widely watched jobs stat registers only the net change in employment; it obscures the furious process of both creation and destruction, the dynamism that we witness every time a friend or neighbor loses one job and finds another. In a typical year, some 32 million Americans are hired and about 30 million lose or leave their jobs. And job destruction has been occurring at a normal rate since the end of the recession. The problem is, first, the loss of quality jobs like those at Timken. And, second, job creation -- hiring -- has been atypically slow. What can government do about these ills?
It helps to understand what Alan B. Krueger, a former Labor Department economist under Reich, bills as ''the Krueger conjecture.'' It goes like this: ''Big countries have more jobs.'' Krueger has a serious, even a surprising, point. For reasons that are not entirely understood, over the long term economies adapt to the supply of productive workers. For instance, Israel absorbed a million Russians, France a wave of Algerians and South Florida a tide of Cubans without depressing wages. (Wages being the price of labor, you would expect them to fall as the supply of workers rises.) A partial explanation comes to mind: those Spanish-speaking Floridians had to buy clothing, cars and cafeteras and in general consume their fair share of goods and services, adding to the demand for labor, not just the supply.
But that does not explain how, in the decades after the Korean War, the United States adjusted to an influx of women in the work force without any discernible rise in unemployment. After all, American women did not exactly discover shopping when they entered the labor force. The only conclusion is that employers gradually took note of the pool of available workers and found productive uses for them. To some extent, the supply of labor also fuels the demand for it.
''How does the U.S. economy manage to provide so many jobs for a growing population?'' Krueger and his co-author, Jorn-Steffen Pischke, ask. ''U.S. employment growth is as much a mystery as a miracle.'' But Krueger chalks it up in part to our flexibility. It takes far less time and far less paperwork to set up a business in the United States than almost anywhere else. (Five days in America, 18 in Britain and 45 in Germany, according to one estimate.) In parts of Europe, you can't even open a new drugstore without getting permission from the other drugstores in town. This doesn't mean that restrictions on businesses are always undesirable; most Americans are probably glad that restaurants need a certificate from the board of health before they open. But such restrictions do come at a cost. Fewer luncheonettes means fewer jobs. More restrictive environmental laws means less offshore drilling, higher gas prices and, presumably, more firms like Alcoa opening facilities in countries with cheaper energy. The general point is that any long-term jobs policy, in order to improve people's chance of finding work, ought to maintain a high degree of flexibility in the economy.
Not that this is easy. The first instinct of most politicians, indeed of most citizens, is to worry about where the new jobs will come from. With a few exceptions, that isn't knowable. Remember the 1967 movie ''The Graduate,'' in which Dustin Hoffman is advised to focus on ''plastics''? Since then, employment in that industry has tumbled by 40 percent. Don't blame Mike Nichols, the film's director. He couldn't have foreseen that plastics would tank any more than he could have predicted that two geeks would invent Apple. In fact, a quarter of all jobs today are in categories that didn't exist when ''The Graduate'' was made.
Presidents can promote jobs via basic research, though the effects will not appear until they are writing their memoirs. For instance, there is a government initiative in nanotechnology, the science of downsizing industrial operations to molecular levels. In the future, this could lead to new and high-paying companies -- just like what happened when the Department of Defense developed the Internet or as may occur in the federally financed genome project. But mostly the jobs of the future aren't foreseeable.
The Krueger conjecture reassures us that as long as the ''graduate'' gets a decent education, he will adapt to opportunities as they evolve. But given how hard it is to visualize those future jobs, people's second instinct is to demand that we hang on to the familiar jobs that are disappearing. (Think Canton.) This is almost always a mistake.
Just before World War II, nearly 20 percent of Americans worked in agriculture; today, fewer than 2 percent do. Had we ''protected'' the displaced 18 percent -- had we kept them on the farm -- our agriculture would be less productive and our economy would be weaker. The agriculture of 2004 is, of course, manufacturing. At Timken, it once took 17 hours to produce a ton of steel; today, only 2 hours.
Such improvements, replicated across the country, help to reshape the labor market in lasting ways. Since 1998, the United States has lost three million jobs in manufacturing. Reinforcing the idea that the economy is being fundamentally retailored, Erica Groshen, an economist at the New York Fed, reports that the recent economic cycle has not followed the familiar pattern in which firms announce layoffs and then gradually rehire. Instead, some industries have permanently shed jobs; others have been net winners.
However, it's important to recognize that structural change is itself cyclical; while the economy is always evolving, every generation or so some technological innovation will spark a temporary, but alarming-seeming, acceleration. In the late 19th century, as railroad tracks were knitting the country together, lumber mills in Ohio suddenly found that they were competing with the Pacific Northwest. Armies of unemployed roamed the middle states angrily demanding that the government provide them with work. If you can imagine the tracks stretching to Shanghai or Bangalore, you get a sense of the anxiety in the labor market today. This is why, after a period of liberalism under Clinton, the pressure to legislate trade is also at a cyclical high.
Intellectually, protecting the United States from Asia or Europe is akin to protecting Ohio from Oregon a century ago. Tactically, it's like fighting a war of attrition in which two billion Chinese and Indians are on the other side. I asked Jacob Jabs, a Colorado retailer who imports furniture from the Far East, what the government could do to save the jobs of domestic furniture makers. ''It's a lost cause,'' he said. ''Protectionism is a lost cause.'' Jabs went on to describe, with unconcealed delight, the ''gorgeous'' eight-million-square-foot factories where 10,000 Chinese churn out quality bed sets 70 hours a week. This is why American unions have steadily declined; they can't organize in China. Nor does punishing companies for doing business overseas look like a promising fix. It turns out that the U.S. multinationals hiring abroad are also the companies adding fastest to their payrolls at home.
Trade law is Byzantine, the details of which are understood by only a few grunts on Capitol Hill. Its weird, prejudicial nature may be illuminated by the Byrd Amendment, which entitles victims of ''unfair'' trade to collect penalties from importers. But only victimized corporations -- not their employees -- collect. In steel, Tim Timken's corporation has received more than $100 million; Ohio workers, nada. It's dubious whether this will promote more jobs -- or better jobs.
The one sensible trade lever at the U.S. president's disposal is the dollar. It's seriously overvalued against China's currency and probably against the Japanese yen. An overvalued dollar, of course, hurts our competitiveness. Sooner or later, the dollar will have to adjust, and any president should use his political influence to make it sooner.
Nonetheless, America will continue to deal with an expanding presence of Asians -- and particularly of educated Asians -- in the global economy. U.S. workers aren't competing with only low-skilled workers; Intel India is advertising for high-level electrical engineers, and so forth.
The alternative to protecting jobs is to protect the engineers who might compete for those jobs -- that is, to invest in their education, their training, potentially their health care. Jeffrey Garten, dean of the Yale School of Management, says he believes the time is ripe for a total rethinking of the safety net. ''I'm looking for a safety net that adds to flexibility, not to the status quo,'' he notes. This prescription follows from the Krueger conjecture: more quality workers means more quality work.
he first postwar president to try to retool the work force was Lyndon Johnson. L.B.J. practically invented the idea of government training -- the Job Corps. He started broad-based student loans too. ''We sent hundreds of thousands of people to trade schools,'' recalls Joseph A. Califano Jr., L.B.J.'s chief domestic adviser. The Great Society did foster a lot of jobs, though it's hard to say what credit is due to the vigor of domestic spending and what to the Vietnam War and what to the red-hot private economy. But in the darker economic climate of the 70's, the jobs numbers worsened.
And Richard Nixon, Johnson's successor, made the cardinal error of presidents who do not understand that their control over such things is limited. Nixon's education began in January 1971: after months of a weakening jobs picture, the Bureau of Labor Statistics reported a slight dip in unemployment, from 6.2 percent to 6 percent. The labor secretary pounced on it as ''very significant.'' The experts at the Bureau of Labor Statistics did not agree. In his regular press briefing, Harold Goldstein, an assistant bureau commissioner, called the drop only ''marginally significant.''
That March, the labor secretary terminated the bureau press conferences, a staple of Washington news dissemination. Then, in July, the bureau reported another drop in unemployment, but added that the decline might be overstated due to ''technical'' problems. Nixon was furious, especially with Goldstein. ''I have had it,'' he said. ''He is an all out son of a bitch who has been against us for 20 years.'' Not only was Goldstein transferred; Nixon ordered an aide, Frederic Malek, to count the number of Jews among the upper ranks at the bureau.
Though that, presumably, was the low point for government statistical work, it did not end the latent tension between elected politicians and civil servants. Reagan's labor secretary, Raymond Donovan, also tried to muzzle the bureau, but Janet Norwood, then the commissioner, backed him off. Eventually, the bureau began to release data at a hearing before the Joint Economic Committee. Senator William Proxmire explained the reason for the change: ''I go through this review to remind us that the unemployment data constitute political dynamite. . . . The most obvious practical proof of the wisdom of a president's economic policies is what those policies do to jobs.''
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