Disappointing Job Growth May Signal Worse to Come

by Mike Hall, Jun 2, 2006

While the Bush administration continues to sing the praises of what it calls a strong economy, for the second straight month, job growth has fallen far behind the rate projected in rosy government forecasts. Analysts expected gains of about 175,000 new jobs in May, but 100,000 of those new jobs did not materialize.

The jobs figures, released today by the federal Bureau of Labor Statistics (BLS), are the worst since July 2004, not counting the months last fall affected by the Gulf Coast hurricanes. (Today, 80,000 workers remain jobless because of those hurricanes and their emergency unemployment benefits are set to expire this weekend.) 

The past two months’ disappointing job growth, plus other down-trending economic indicators, may be a hint of what’s to come, says Economic Policy Institute senior economist Jared Bernstein:

Turning points are always hard to pick out of monthly reports, but the slower monthly job growth shown in the figure has persisted now for the past few months. The economy is now facing headwinds that were not evident in prior months, including higher interest rates, less stimulus from the housing sector and higher energy prices.

Dean Baker, co-director of the Center for Economic and Policy Research, echoes that warning:

The weak job growth numbers give grounds for questioning future strength. It is clearly only a matter of time before the buildup of housing inventory leads to further cutbacks in construction and real estate, which will put a serious damper on what already appears to be weak demand growth. The current data may also overstate job growth somewhat. In the last two months, there were 482,000 jobs added to the data to account for new firms not captured by the survey. This compares to 397,000 in April-May of 2005. If the economy has hit a turning point, the BLS model is overstating jobs in new firms and therefore overstating employment growth.

While President George W. Bush claims great benefits from his tax cuts—most recently on corporate dividends and capital gains and now he has the estate tax repeal in his sights—USA Today columnist and economist Julianne Malveaux sums up who is really enjoying the fruits of the Bush economy. And it isn’t most of us:

The average American has not experienced much good economic news lately. The wealth gap is growing. Median family income has been dropping.  Meanwhile, gasoline prices are up 36 percent from a year ago. With interest rates rising, those with adjustable rate mortgages face higher payments, and residential rents also are nudging up. Incomes are not keeping pace with inflation, and the job market is weak.

There don’t seem to be many breaks for those at the bottom.

The $5.15 hourly minimum wage has not been raised in a decade. The most recent tax cut legislation that extends breaks on capital gains and dividends will provide the bottom 40 percent of taxpayers with less than $20 in tax cuts over a three-year period. In contrast, more than two-thirds of the benefits of the tax cut will go to the top 5 percent of our nation’s earners.

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