WSJ: economic expansion continues, Eeyore in denial

This is an editorial from this morning's journal, but it's got some valuable perspective, supported by numbers, on the kerry campaign's continuing effort to spin the recovery in the worst possible light.

http://online.wsj.com/article/0,,SB108717571586535980,00.html?mod=opinion_main_review_and_outlooks

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Gloom and Boom
June 14, 2004

Here's a quick primer on how to track an economic recovery: When the media fret that the U.S. is heading for a decade of stagnation like Japan, that means profits and investment are picking up. When you hear that profits have risen but we're stuck in a "jobless recovery," businesses have started hiring. And finally when the cry goes up that American workers can find only low-paying menial jobs, that's the tip-off that the economy is booming.

Congratulations, America, the return of "McJobs" rhetoric signifies that an expansion is in full swing.

This week the Kerry campaign plans to focus on the theme that while the economy may now be creating jobs at a rapid pace, most of those jobs are lousy. Campaign spokesman Allison Dobson signaled this argument after the bullish May jobs report by claiming that "Jobs are scarce and those lucky enough to have one are making $1,500 less each year."

The AFL-CIO is singing from the same hymn book. President John Sweeney complains that not only has President Bush refused to extend jobless payments, "we're not creating good, family-supporting jobs with benefits." The union group claims that jobs in growing sectors pay 20% less than those in declining sectors. What's more, "working women have been hit hard by the jobs crisis," with 2.3% fewer women employed in April 2004 compared with March 2001.

OK, let's see if this gloom-mongering stands up to scrutiny. The fine print on the Kerry campaign's Web site identifies 2000-2002 Census data as the source of the $1,500 figure. These statistics are 18 months out of date, and they do not show, as Ms. Dobson claimed, a decline in an average worker's income. Rather it was the median household income that suffered a $1,462 decline. That figure not only includes those unlucky enough to have lost a job, it also reflects a 1.5% drop in the average household size.

In fact, working Americans have enjoyed salary increases each year since 2000, in both nominal and real terms -- remarkable considering that for most of 2001 the economy was in recession. Full-time workers got a 7.7% hike in their average weekly earnings over the last three years. Last month, hourly wages were up by 2.2% year on year.

The Kerry campaign also complains of a "wage deficit" of $1,600 per household. Have we all been shortchanged? No, this is just the gap between wages and "what they would have been given historical wage growth," that is, extrapolating forward from the bubble years of the late 1990s. Only someone who has spent too long in the Senate would think of applying Congress's "baseline" budgeting -- under which any budget item that grows less than expected is thought to be "cut" -- to households.

So if wages are rising, how come the unions say new jobs are paying less than old ones? The AFL-CIO cites an analysis by the union-backed Economic Policy Institute of last November's employment figures showing a 21% gap between the average wage in growing and contracting industries. Because there is always a range of salaries within industries, anyone can slice and dice the definitions to get the answer he or she wants.

But consider that over the last six months, some 665,000 new jobs, more than half of the total, were created in the higher paying service industries, such as financial and information services. As the table nearby shows, these fields boast average salaries of $17.34 an hour, compared to $15.20 per hour in manufacturing (or $16.07 with overtime).

The idea that women are falling behind is even easier to dismiss. The AFL-CIO committed a simple math error, misplacing a decimal point by one place. Using the figures the union gave for the last three years, the number of women employed fell just 0.23%, not 2.3%. Women have actually done very well during the Bush years -- their median earnings rose 5.4% between 2000 and 2002, compared to 1.4% for men. That meant the ratio of female-to-male earnings hit an all-time high in 2002. Moreover, the current 4.8% unemployment rate for women is significantly lower than the national average of 5.6%.

Nobody can blame the Kerry partisans for pushing the "bad jobs" gambit -- you play the hand you're dealt. However, the Bush Administration should be happy to engage in this debate, since it's one that it can win on the merits.

BIG PAYCHECKS

Over the past six months, 665,000 of the 1.2 million new jobs were in the higher-paying service sector.

Average Hourly Earnings

Services, excluding retail and leisure
$17.34

Utilities
25.47

Information
21.40

Finance
17.52

Professional Services
17.37

Education/Health
16.07

Manufacturing
15.20

Source: Bureau of Labor Statistics