Mediocre but mounting - Hiring picks up under Bush
WASHINGTON -- Hiring is picking up and President Bush is on track to preside over job growth in his second term, shedding the Herbert Hoover label of being the first president since the Great Depression to lose jobs under his watch.
But don't expect a revival of the booming 1990s.
Bush's prescription for job growth includes extending the tax cuts passed in his first term, overhauling tax laws, limiting jury awards in lawsuits and increasing domestic energy exploration and production.
Economists say the bigger impediments to job creation are soaring health-care and energy costs and the swelling trade deficit, especially with China.
Businesses, not presidents, create jobs. But presidential policies help create economic conditions that affect companies and hiring.
Economists estimate that an average of about 1.4 million jobs in the United States will be created each year over the next decade as businesses strive ever more to compete globally. That compares with an average of about 2.8 million added annually during President Clinton's eight years in office.
"We can expect to see a mediocre job market for the next year from the perspective of workers," said Peter Morici, an economist and international business professor at the University of Maryland. "And we can expect to see moderate growth in the economy and employment, but not enough to turn what is essentially a buyers' market into a sellers' market."
Analysts say Bush's tax cuts helped the economy through recession and that while job creation lagged, extending them would encourage new hiring.
Employers added 1.8 million new workers to their payrolls so far this year, with the hiring outlook brightening greatly in October. But there are 371,000 fewer jobs than when Bush took office in 2001.
"There's no question that when you lower taxes, whether you do it for upper-income, middle- or lower-income, you create jobs," said Anthony Chan, senior economist with JPMorgan Fleming Asset Management.
Chan said the tax breaks failed to create the millions of jobs promised. But, he said, "the recession probably was a lot milder than it otherwise could have been because of the stimulus."
The cost of making the cuts permanent is more than $1 trillion, a daunting figure in an age of record budget deficits. But Bush is likely to get much of what he wants with larger Republican majorities in both the House and the Senate.
The ballooning budget deficit hit a record $413 billion in 2004. It could lead to rising interest rates that limit business investment and slow production. But many economists say the deficit is not an immediate threat to job creation.
"In long run, yes, but in the next couple of years, probably not," said David Wyss, chief economist at Standard & Poor's in New York. "The biggest problem with deficits is you have to pay them back."
The trade deficit is of greater concern to some economists. U.S. manufacturers say China's practice of tying its currency, the yuan, to the dollar has undervalued China's currency by as much as 40 percent, giving companies there a huge advantage over U.S. competitors.
About 2.7 million manufacturing jobs have been lost since Bush took office and the shift of U.S. jobs to other countries was a major issue in the election, especially in Rust Belt states.
Morici predicted that the manufacturing sector "will continue to deteriorate to the point of peril. We are now losing our capacity to resurrect it if something is not done soon" to deal with China.
The trade deficit was running at an annual rate of $592 billion through September. That compares with last year's $496 billion. The administration has pressed China unsuccessfully to change its currency practices and has promised "to level the playing field."
Other economists say red tape is hurting U.S. companies' ability to compete globally and they praise Bush's goal of continuing to loosen government regulations.
The jobs market also has been shaky because of rising costs for health care and other benefits. Employers responded by working their existing employees harder to avoid increased expenses of new workers.
To control health costs, Bush wants to limit jury awards in medical malpractice lawsuits and to expand tax-free health savings accounts that can be used to pay medical bills. Economists doubt the measures would have much effect.
"I really do see what the president wants to do on health care ... as a fig leaf," Morici said.
Economists do not see much relief in the future from oil prices. Bush's energy plan, emphasizing drilling, exploration and production, would add some jobs. Bolstered by a larger majority, Republicans plan to make another push to open an Alaskan wildlife refuge to oil drilling. But Bush's energy plan falls short in conservation and alternative energy sources, which are longer-term problems, economists said.
Bush also wants to create "opportunity zones" to spur investment in needy communities through tax benefits. Economists don't expect the initiative to spark much overall job growth. Instead, it would send jobs to more needy areas of the country.