Good Economic News Might Not Be Enough

The Bush administration got a rare piece of economic good news when the Labor Department announced Friday that American employers had added workers last month instead of subtracting them. The sighs of the relief were audible across the capital.

“The economy is definitely in a recovery mode,” declared Labor Secretary Elaine Chao.

“Positive employment growth is exactly what we were looking for,” added N. Gregory Mankiw, chairman of the White House Council of Economic Advisors.

In fact, much about the U.S. economy is beginning to turn positive as President Bush heads into his reelection bid. The gross domestic product almost certainly grew at a strong 5% pace or better in the just-finished July-through-September quarter, and most forecasters predict that it will keep growing at 4% or more during rest of this year and next. Corporate profits and business investment are up. The stock market has roared back.

But going into the election year, Bush still faces an uphill struggle on the economy. That’s because the trends that matter most to ordinary Americans -- employment, wages and benefits, especially health insurance -- are either flat or actually headed in the wrong direction.

“People going back to work for good wages and benefits: That’s the definition of a good economy,” said Republican pollster Glen Bolger of Public Opinion Strategies in Virginia. “It’s not GDP. It’s not productivity. It’s not the foreign trade deficit.

“It’s people going back to work.”

Statistics show that not many people have gone back so far, and of those who kept their jobs, few have seen improvement in their wages or benefits:

* The 57,000 jobs that employers added in September, the first gain in eight months, still left more than a million lost jobs just since the economy began growing again in November 2001. Economists say the nation needs to create 100,000 to 150,000 new positions a month just to keep up with young people looking for their first jobs and those coming back into the labor force.

* Per-capita wages and salaries adjusted for inflation have slipped from a high of nearly $15.80 an hour in June to $15.46, according to government statistics. The slide squares with the results of a new survey by human resources consultant DBM, which found that 52% of job seekers reported agreeing to take a pay cut in order to land their new positions.

* The share of Americans without health insurance took its largest jump in a decade last year. Those best situated to get and keep health coverage -- full-time adult workers -- were among the biggest losers. Almost a million more full-timers were uninsured in 2002 than the year before, according to the Census Bureau.

Underlying all these trends, there remains the looming question of whether the economy can keep up its current pace, a prerequisite for more jobs, wages and benefits. Twice before in recent years, the economy has put on bursts of growth just as powerful as the one now underway, only to slump backward.

“We have a recovery forecast, but we don’t have the recovery yet,” said Congressional Budget Office Director Douglas Holtz-Eakin.

How economic forces play into a presidential campaign is never simple. Some analysts use candidates’ policy proposals as a measuring stick and conclude that if there aren’t many, the economy must not be a big issue. But longtime political observers say the economy’s role is often subtler and more influential than this approach suggests.

“The state of the economy sets the broad context in which a president runs for reelection,” said Thomas Mann, a political scientist with the generally liberal Brookings Institution in Washington. “For voters, it’s not so much about policy as, ‘Hey, have things been going well under this president, or poorly?’ ”

And by this gauge, Bush has some cause for concern even with the recent pickup in growth.

The president has never won high marks for the economy despite having clearly articulated and aggressively pursued a single economic policy -- tax cuts.

Polls show that after peaking above 70% in the immediate aftermath of the Sept. 11, 2001, terror attacks, Bush’s ratings for economic management eroded sharply. The latest Gallup Poll in mid-September showed that only 45% of respondents approved of his handling of the economy, while 53% disapproved. (The remaining 2% had no opinion.) Other polls have produced similar results.

In themselves, analysts say, these numbers mean little; early in the year before his triumphant 1984 reelection, Ronald Reagan scored 29% on his job approval rating for the economy.

But the combination of Bush’s continuing weak poll numbers and an economy that has yet to consistently deliver the kinds of improvements that count most with voters has emboldened the president’s Democratic challengers.

Former Vermont Gov. Howard Dean, retired Gen. Wesley Clark and Massachusetts Sen. John F. Kerry rarely miss a chance to point out that Bush is the first president since Herbert Hoover to seek reelection with the economy having lost jobs during his first term in office. With nonfarm payrolls down 2.7 million since Bush entered office, even optimistic forecasters say that the shortfall is unlikely to be made up between now and November 2004.

Democrats have, in the words of one GOP strategist, found a “socially acceptable way” to go after the president on tax cuts. Although they differ on the details, all say they would roll back some or all of the administration’s cuts to pay for everything from the cost of the Iraq conflict to universal health care.

What the Democrats have not done in any detail is offer a plan for what they would do should the economy slump again after a brief sprint. But then neither has the president -- in large measure, because there is not much else Washington can do after the huge plug of tax cuts and interest rate reductions of the past few years.

Which means that everyone from the president on down is left to hang on each new statistic, hoping for a clear signal of which way the economy is going. Last week’s jobs numbers heartened the president and his people. But even politically sympathetic economists say that the issue is far from settled.

“Beyond some hazy assertions that the chances of recovery are better this time since we have had more time to adjust ... the outlook is not particularly bright,” John H. Makin, an influential economist with the conservative American Enterprise Institute in Washington, recently wrote.

“We can surely hope for this outcome,” he continued, “but based on the data available so far this year, we cannot count on it.”