Fudging the economy
By Thomas Oliphant
Editorial
The Boston Globe
8/6/2002
NORMALLY, consumers of information about the economy pay scant heed to Bush administration officials. In the financial and policy worlds, they have a deserved reputation for ideological blinders, tight political scripts, and poor persuasive skills.
When the jittery country got two tough jolts of disturbing information about the now officially anemic recovery, however, this absence of leadership ability tended to make an upsetting situation worse. The continued inability of President Bush's team to communicate, an inability that begins at the top, is going to make consumers and not just investors even more concerned than the facts would seem to require they be.
The reports, first that the recovery effectively stalled in the second quarter and second that an expected spurt in the number of private sector jobs failed to materialize last month, were each made more disturbing by the atrocious ''analysis'' with which top officials greeted their publication.
With the news that employment gains essentially disappeared during July, Labor Secretary Elaine Chao said the country should take heart from the fact that the unemployment rate ''was essentially unchanged'' and that the number of unemployed Americans who have been out of work for at least 15 weeks declined after more than a year of increases during the recession.
Her statement was absurd, and it will only heighten suspicions that conditions must be serious if Bush advisers go to such silly lengths to fudge the obvious.
Normally, it is a fact that in business recoveries the initial direction of the unemployment rate is up for a brief spell. This occurs because as economic conditions are seen to be improving people who have been discouraged begin reentering the labor force in large numbers, larger than there are jobs for them initially. On the surface, therefore, the fact the jobless rate remained at 5.9 percent would seem encouraging.
Chao's point is destroyed, however, by the simple fact that instead of growing, the labor force actually contracted last month. The true picture, moreover, appears to suggest that the odd month out was deceptively prosperous June, not clearly stagnating July. In June, the Labor Department said employment grew by 66,000 jobs, nearly double the original estimate. This is fully two-thirds of all the jobs that have been added since the recession bottomed out. The puny figure of 6,000 recorded last month represents a return to the so-called jobless recovery pace since the spring.
Worse, this was a month when employers cut working hours and sharply limited overtime even as they resisted adding workers. Possibly the most disturbing news of all was that nearly 200,000 part-time workers tried to get full-time jobs during July and failed.
So much for Elaine Chao. If anything Glenn Hubbard was worse.
As chairman of Bush's Council of Economic Advisers, Hubbard is a White House favorite because he is a reliably true-believing conservative. What pleases a president's base of political support, however, is usually useless for everyone else, as Hubbard demonstrated in his analysis of the report that the gross domestic product expanded between April and July only in a technical sense.
Like Chao, Hubbard tried to make unsettling news encouraging. The fact that growth plummeted to a 1.1 percent annual rate from a downward-revised 5 percent in the first quarter meant, he said, that the 3 percent average for the first half of the year was ''about right'' given the shallowness of last year's recession. Hubbard also said that the initial spurt in growth at the start of the year included spending that would otherwise have occurred later.
Nice try, but that message is spin, not analysis. The fact is that the ''real'' economy's output of goods and services shrank during the second quarter. The only reason there was an increase was that after drawing down their inventories during the recession, business began stocking their shelves again, a process that was also of major importance to the first quarter's lonely spurt of growth.
For President Bush to assert that all this news shows the country is ''heading in the right direction'' is fatuous, about as helpful to confidence as were his remarks during the recent stock market plunges.
A more candid assessment would recognize strengths (the consumer and housing) as well as renewed weakness (especially in manufacturing). That, however, would require a more candid assessment of the country's public finances, which are fast deteriorating.
It is easy to grab a headline with fears of a ''double-dip'' recession, but the truth is that while the danger is greater than it was, the real problem is the pace of the recovery, not its existence.
Until business investment, which was the driving factor in the recession, becomes the driving factor in recovery, the fact is that growth as far as the eye can reliably see (into next year) is much too weak to produce significant growth in jobs or in sorely needed federal revenue. The danger is that a weak administration will exacerbate these disturbing trends in a weak economy that needs a shot of confidence.
Thomas Oliphant's e-mail address is oliphant@globe.com.
This story ran on page A15 of the Boston Globe on 8/6/2002. |
