washingtonpost.com
Economy Gained Muscle Last Year, Expanding Jobs
In Chicago, Bush Rejoices and Says Policies Are Working
By Jim VandeHei and Nell Henderson
Washington Post Staff Writers
Saturday, January 7, 2006; Page A03
CHICAGO, Jan. 6 -- The U.S. job market strengthened last year, as employers added 2 million jobs and the unemployment rate fell to 4.9 percent in December, the Labor Department reported Friday. The data reinforced other signs that the economy was growing at a healthy pace as it entered the new year despite the turmoil caused by hurricanes and higher energy prices.
The figures offered a well-timed boost to President Bush, who touted them here in his latest outing in a campaign to convince Americans that his tax and budget policies are working, despite polling that shows widespread unease about the economy.
President Bush makes remarks to the U.S. University Presidents Summit on International Education at the U.S. State Department, Thursday, Jan. 5, 2006. (AP Photo/Lawrence Jackson) (Lawrence Jackson - AP)
TRANSCRIPT
President Bush Delivers Remarks on the Economy
President Bush spoke today in Chicago on the state of the U.S. economy.
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Bush Trumpets New Economic Numbers
President Bush shrugged off a report showing weaker than expected job growth on Friday and declared that "the American economy heads into 2006 with a full head of steam."
Congressional Democrats said the unease is justified, noting that job growth in December was slower than many economists expected and citing Labor Department data showing that, for the average worker, prices are rising faster than wages.
"Americans are going to work, this economy is strong, and we intend to keep it that way," Bush said in lunchtime speech to the Economic Club of Chicago. Hitting on several themes he plans to trumpet in his State of the Union speech, the president argued that tax breaks, spending restraints and robust trade are making the U.S. economy the "envy of the industrialized world."
Bush did not unveil any new policies but called on Congress to make permanent many of the tax cuts enacted during his first term and to cut spending more. "Listen, we got a lot of people in Washington who preach fiscal discipline, and then they go on to vote against spending restraint," Bush said.
The job growth would have been stronger last year if not for hurricanes Katrina and Rita, which wiped out homes and workplaces while displacing more than 1 million Gulf Coast residents, analysts said.
The jobless rate has been around 5 percent since March. That is well below the recent high of 6.3 percent in June 2003 but still above the most recent low of 3.8 percent in April 2000, at the height of the tech boom. It is higher than the 4.2 percent of January 2001, when Bush took office.
Employers cut construction jobs last month, which some analysts attributed to cold weather. And retailers trimmed payrolls, reflecting a combination of caution about the holiday shopping season, the growth in online purchases and rising worker productivity. The losses were more than offset by gains in manufacturing, professional services, education, health care, recreation and government jobs.
But the average pace of job growth in the last two months of the year was about the same 200,000 jobs per month recorded in the two months before Katrina hit in August.
The total number of new payroll jobs last year could have reached at least 2.2 million were it not for the storms, said Ray Stone, an economist with Stone & McCarthy Research Associates.
The labor market is "very strong" and adds to other data indicating "the economy is gathering momentum," said Richard Yamarone, director of economic research at Argus Research Corp. "Economically speaking, it seems the hurricanes were only a temporary blip."
Stock prices rose after the employment report was released as investors viewed it as a signal that the economy is likely to grow briskly this year and that the Federal Reserve may be nearing the end of its series of interest rate increases.
The Labor Department followed reports showing solid holiday retail sales and rising factory orders, business investment and consumer confidence. But some analysts noted other disappointing indicators, including increasing poverty, a growing trade deficit and inflation exceeding wage gains for most workers.
Average hourly earnings rose 3.1 percent over the last year to $16.34, Labor Department reported. But consumer prices rose faster last year, up 3.5 percent in the 12 months that ended in November, the most recent inflation measure available.
Indeed, in November, average hourly wages were lower after being adjusted for inflation than they were four years earlier at the end of the last recession, according to Labor Department data. These figures apply to private production workers and non-managers in service jobs, who account for more than 80 percent of the workforce.
"Middle-class Americans' paychecks are flat or dropping while health care costs continue to rise and home heating costs skyrocketing," House Minority Leader Nancy Pelosi (D-Calif.) said in statement.
While Bush was visiting the Chicago Board of Trade futures exchange, Vice President Cheney was touring a Harley-Davidson plant in Missouri and touting the economy despite a bad foot that forced him to use a cane. Treasury Secretary John W. Snow and several other officials also fanned out to talk about low unemployment numbers and a growing economy.
Meanwhile, White House aides continue to fine-tune the policy agenda Bush will unveil later this month, constrained by politics and a tight budget for nonmilitary spending. Bush advisers have shelved plans for an ambitious tax reform agenda, fearing it would flop politically, but still plan to roll out a few new targeted tax and budget plans in the State of the Union address. |
