SAMUELSENSE:

A Phony Jobs Debate (Robert J. Samuelson, February 25, 2004, Washington Post)

Facing a weak economy, a government can do three things: cut interest rates; run a budget deficit; and allow -- or cause -- its currency to depreciate. The first two promote borrowing and spending; the last makes a country's exports cheaper and its imports costlier. All these weapons have been deployed. Bush's policies are mostly standard economics; based on past patterns, these policies should have produced stronger job growth. But private employers have resisted hiring. "Economists are scratching their heads," says Randell Moore, editor of the monthly Blue Chip Economic Indicators, which surveys 50 economic forecasters.

Some jobs have moved abroad. Slow foreign growth and (until recently) the high dollar have hurt U.S. exports and encouraged imports. Mark Zandi of Economy.com estimates that almost 900,000 manufacturing jobs have been lost to the higher trade deficit. By contrast, he reckons that "offshoring" of service jobs -- call centers, software design -- has cost only about 200,000 jobs over the same period. That's out of more than 130 million jobs. There are other theories. By one, higher fringe benefits (mainly health insurance and pension costs) have deterred companies from hiring. Although wage increases are slowing, total labor costs including fringes are actually rising. They grew 3.8 percent in 2003, up from 3.4 percent in 2002. Another theory is that employers have delayed hiring because they worry that the recovery will falter.

We don't know. But what we can know is that policies from a President Gore or Kerry or Edwards wouldn't have improved matters much. Of course, Democrats might have discarded some Bush policies: say, tax cuts for the rich. Still, the main forces shaping the job market would have remained well beyond presidential reach: the boom-bust cycle (President Bill Clinton didn't create the boom, and the bust was unfolding even before Bush's election); weak growth in Europe, Japan and Latin America, which account for almost 40 percent of U.S. exports; and business cautiousness. Protectionism is no panacea. It barely touches job creation; America's trade problem is weak exports as much as strong imports. Even if every offshored service job had somehow been saved, the job picture wouldn't have changed much.

No matter. During elections, politics overwhelms reason. Perhaps continuing economic growth and a weaker dollar will soon produce more jobs. On average, the economists surveyed by Moore expect 166,000 new jobs a month in 2004 -- or about 2 million for the year.

As one goes to Stuart Taylor for non-partisan legal analysis--though not unopinionated--so too one turns to Mr. Samuelson for common sense on economics.

Posted by Orrin Judd at February 25, 2004 7:31 PM