White House jobs forecast overly optimistic, private economists

WASHINGTON -- The Bush administration is overly upbeat in predicting that 2.6 million new jobs will be created this year, private economists say.

It is a hurdle that would require the administration, in just one year, to replace all of the jobs that have been lost in the three years since President Bush took office.

"The job machine would have to rev up very, very quickly" to do that well, said Mark Zandi, chief economist at Economy.com.

The jobs outlook, included in the president's annual economic report to Congress, comes as the economy continues to gain steam. But the job growth that typically follows an economic rebound has been sluggish at best.

The economy has lost 2.2 million payroll jobs overall since January 2001.

The U.S. economy, to match the White House's jobs forecast, would have to churn out well over 220,000 new jobs each month for the rest of the year, economists say.

"It's more than I would forecast, but I'm not running for re-election," said David Wyss, chief economist at Standard & Poor's.

Added Zandi: "Is it likely? No. Is it implausible? No."

Private economists expect job growth this year of about half the administration's estimate, fueled by hiring in health care, education services, defense and home construction.

To reach 2.6 million, the pace of job creation would have to return to the heyday of the late 1990s, a time warp that few analysts expect the economy to travel anytime soon.

But White House spokeswoman Claire Buchan said the pace of job growth is increasing, and would be boosted further by Congress enacting the president's six-point economic plan "so we can build on this trend and create an even more robust environment for job creation." Bush's plan includes making recent tax cuts permanent and getting an energy bill and tort reform passed.

Despite recent tax cuts, businesses are still reluctant to hire. They are being squeezed by intense global competition and soaring health care and pension expenses, and are trying to hold down their costs by working their employees harder and shipping jobs overseas.

"When a good or service is produced at lower cost in another country, it makes sense to import it rather than to produce it domestically," the president's report says. "This allows the United States to devote its resources to more productive purposes."

But the outsourcing of American jobs is hitting a political nerve this election year.

"President Bush's tax and trade policies have fueled this trend in outsourcing, which has clearly contributed to job losses in our economy over the past three years," Rep. Pete Stark, D-Calif., senior Democrat on the Joint Economic Committee, said at a hearing Tuesday. "President Bush stands idly by as jobs continue to take flight from the U.S., and now we know why -- it's part of his economic plan."

Republicans countered that job growth is picking up, which is evidence that Bush's policies are working on an economy battered by recession, terrorist attacks and corporate scandals.

"Despite a perfect storm of blows to the economy, recent economic indicators tell us what many have already been feeling, that the economy is now experiencing a strong recovery," said Joint Economic Committee Chairman Sen. Robert F. Bennett, R-Utah. "Over the next year, we can look forward to a robust economy and the job creation that will follow."

Bush said in the economic report that the economy is moving in the right direction. However, he added, "I will not be satisfied until every American who wants a job can find one."

The White House's previous predictions on job growth have been way off the mark. Last year, the administration forecast 1.7 million new jobs for 2003. The economy lost 439,000.

In Bush's first economic report, the administration estimated that 100,000 payroll jobs would be lost in 2002, when the economy was emerging from recession. The country lost 1.45 million jobs that year.

The job forecast this year would not be unrealistic in a "more normal" economic recovery, Wyss said. "Unfortunately, it has not been a normal recovery and I don't see much sign that it's going to become normal."

Economists say the jobs lost to other countries aren't coming back. All told, the nation's factories have lost 3 million jobs in the last 42 months since a peak in July 2000.

Ultimately, investment in overseas jobs will benefit the U.S. economy by providing cheaper goods and services, economists say.

"There's nothing wrong with exporting jobs, as long as you're importing an equal number of jobs," Wyss said. "The problem is, right now we're not doing that."

Lawmakers are going to have to think creatively to provide conditions to compete globally and create jobs, economists said. The economic models in which tax cuts spur investments that create jobs do not seem to work anymore.

"Policymakers need to work to lower the cost of labor," Zandi said. "Instead they've been working to lower the cost of investments. That has got to change, and that means they have to tackle the thorny issues of pension accounting and rising health care costs."