September 13, 2003

WHAT'S A 401k?

Rapid Growth Seen for U.S. Economy (EDMUND L. ANDREWS, September 13, 2003, NY Times)

The American economy finally seems poised to roar ahead at rates not seen since the late 1990's, but economists and some political analysts say the surge may not help President Bush's re-election campaign next year.

A wide range of data suggests that the economy will probably grow at an annual rate of nearly 5 percent in the final months of this year and nearly 4 percent next year — rates that would normally be spectacular news for an incumbent president.

But in a disparity with no real parallels in the last half-century, most economists predict that unemployment will remain almost unchanged at nearly 6 percent through the elections in November 2004.

The incongruous pattern of rapid growth with a stagnant job market stems primarily from an extraordinary gain in productivity, which has allowed companies to produce far more goods with far fewer people. Industrial production has jumped 5 percent since the last recession ended in late 2001, but companies have eliminated one million jobs over the same period.

The political fallout could be bigger than even the job statistics suggest, because most of the job losses have been in manufacturing, a significant sector for many of the most important swing states in the next election: Pennsylvania, Ohio, Michigan, Missouri and Illinois. [...]

And there are other timing issues. Even if statistics suggest the economy is red hot by early next year, it might take several more months for large numbers of voters to actually feel better about their prospects.

New data released today suggested that people are still nervous. Consumer confidence unexpectedly dropped slightly last month, according to the University of Michigan's latest monthly survey. And retail sales, which climbed rapidly this summer, rose only 0.6 percent last month, short of expectations.

"Public opinion and consumer confidence are lagging indicators because people need to feel the changes in their own lives," said Andrew Kohut, executive director of the Pew Research Center.

At over-full employment levels at the end of the 90s we got to 4% unemployment. Suppose were at 6% going into the election. But, in the meantime, the other 94% (I know, it's not that high) have 401k's that are just cranking. Do we really think a booming economy isn't going to help the President?

Posted by Orrin Judd at September 13, 2003 10:39 AM

If unemployment were to drop to 5% by April 2004, the NYT would claim that the weakness of the April shower market will endanger the re-election of George Bush. If the DJIA is over 10,000 on Oct. 31, 2004, the NYT will report that the smaller than average size of the pumpkin crop means trouble for George Bush. Must be the mind-control rays of Dennis Kucinich.....

Posted by: jim hamlen at September 13, 2003 12:16 PM

Remember, all of this is just gibberish in that no one is paying attention until 9/04. The media will try to spin unemployment rates in the 5% as catastrophic but the growth rate and market level will be more important in the election.

Posted by: AWW at September 14, 2003 12:15 AM

How many Presidents have lost a re-election bid when unemployment rates are at six percent?

Posted by: Vea Victis at September 14, 2003 4:54 AM