Two key economic indicators were announced yesterday: the unemployment rate and growth in the gross domestic product. Unlike recent reports, yesterday’s news was not all bad. It was not, however, all good either.
First, the unemployment rate dropped a little in July to 6.2% after reaching a nine-year high in June of 6.4%. That’s the good news. The bad news is, as the AP put it, “nearly half a million discouraged Americans stopped looking for a job,” contributing the fall in the overall job rate.
Making matters slightly worse, 44,000 more jobs were lost in July. While that’s better than the 72,000 jobs lost in June, it’s still more people out of work. Many economists were forecasting (hoping?) that the economy would actually add jobs in July, but that obviously didn’t happen.
In addition, July found that 2 million unemployed Americans have been seeking work for 27 weeks or longer, which is about the same as in June.
This may be an inconvenient time to bring this up, but I distinctly remember Bush promising to add jobs to the economy, not subtract them. When Bush cut taxes by $2 trillion in 2001, he promised robust job creation. That didn’t happen. Earlier this year, Bush promised to create 1.4 million new jobs by the end of 2004 if we passed another obscenely-large tax cut.
Well, George, Congress went along with your scheme — and unemployment isn’t getting any better. To get to 1.4 million new jobs, the economy has to stop actually losing jobs, which hasn’t happened.
Even if there’s an upswing in unemployment over the next year, the likelihood of creating 1.4 million new jobs is poor. And even if, by some chance, the economy does produce that many jobs by the end of 2004, Bush will still be the first president since Herbert Hoover in 1932 to preside over negative job growth.
Then there’s the slightly less bad news. The economy grew in second quarter at a 2.4% rate, which is a full percentage point higher than it was a year ago at this time. The growth in GDP, many economists noted, is still weak by historical standards and it hasn’t boosted the job market, but hey, it’s better than the GDP falling.
So what accounted for the economic growth? That’s kind of the bad news. Defense spending, associated with the war in Iraq, grew 44.1% this quarter, the biggest growth in a quarter since the Korean War over 50 years ago. The Commerce Department explained that defense spending alone contributed about 1.7% of the GDP growth, which means the rest of the economy only grew at about 0.7%, which is dreadfully bad. (Billmon has a nice chart about this.)