June 20, 2004
The Slump Has Ended, but Not the Gloom
FTER enduring three years of a deteriorating job market and one economic false start after another, Americans finally have reason to think that the long slump of the early 21st century has ended. Employers are hiring again. The stock market has risen more than 40 percent since early last year.
And how have the American people celebrated? By becoming a lot grumpier about the economy.
Since January, more than a million jobs have been added to the payrolls, yet the percentage of people who say the economy is in good shape has dropped, polls say. Fewer people now than at the start of the year are willing to say it is improving.
It may sound discordant, but the early days of the new boom really do feel worse for many families than the recession of 2001 or its long aftermath did. The layoffs of the past three years totaled in the millions, but they touched only a small segment of the population. The stagnant wages that have followed job losses, the recent spike in gasoline and other consumer prices and the slow climb of interest rates, by contrast, reach into the pocketbooks of every household. Americans notice when milk reaches $4.43.
The gap between economic indicators and public mood has left strategists for both Mr. Bush's campaign and that of
Republicans argue that the nation's angst is merely an echo of the downturn and that it will soon fall silent. "The economy has really turned," said Senator Jim Talent, Republican of Missouri, a swing state. "It just takes awhile longer for that to filter through to folks."
If this does end up being the high point for pessimism, Mr. Bush will stand for re-election while Americans are feeling pretty good about the economy. Even with gloom rising, consumer confidence is at roughly the level as it was during the summers before Bill Clinton, Ronald Reagan and Richard Nixon won second terms, according to University of Michigan monthly surveys. It is significantly higher than it was in the run-up to losses by Jimmy Carter and Mr. Bush's father.
But unlike recent presidents who won twice, Mr. Bush has presided over a significant slide in confidence, from record highs in 2000. The recent burst of worry has given Democrats new reason to think he is vulnerable on more than Iraq. Swing voters are even more concerned than the rest of the population, according to the Gallup Poll. Only 16 percent of independents described the economy as excellent or good, compared with more than 30 percent of people who say they usually vote for one party of the other.
"It's neither the best of times nor the worst of times," said Frank Newport, editor in chief of the Gallup Poll. "It's neither as dire as Kerry would say it is or as good as Bush would say it is."
In Missouri, a gallon of regular gasoline cost an average of about $1.75 last week, having fallen in recent weeks but still almost 50 cents higher than it was in December, according to GasBuddy.com. In Florida, Maine and New Mexico, three other swing states, a gallon costs about $1.90. The prices of milk and beef have surged, because of a shortage of cows. Consumers also see the increases in eggs, ice cream, butter and mayonnaise.
A poll released on Thursday by the Pew Research Center found that Americans were following news about high gas prices more closely than news about either Ronald Reagan's death or the conflict in Iraq.
Alan Greenspan, the chairman of the Federal Reserve, said last week that inflation was unlikely to be "a serious concern" in coming months. Much of the recent inflation increase has stemmed from unusual events rather than economic demand strong enough to cause prices to keep accelerating, Fed officials say.
The Fed seems poised to raise its benchmark short-term interest rate by a quarter point when it meets on June 30 and to continue increasing rates for the rest of the year. Mortgage rates and other long-term rates have already risen.
Still, inflation has made life a little uncomfortable for many households. The weekly pay of the median full-time worker is rising at roughly the rate of inflation, according to the Bureau of Labor Statistics. Two years ago, when job losses were soaring but the aftereffects of the late 90's boom remained stronger, weekly pay was rising at an annual rate of about 2 percent after being adjusted for inflation.
"There are good indicators now," said Gov. Edward G. Rendell of Pennsylvania, a Democrat. "But people aren't feeling them. The growth is misleading. We're creating the wrong kind of jobs."
The idea that the recent recovery in hiring has occurred largely in low-wage jobs has become a central part of the Kerry message, setting off a series of warring press releases, each with its own dizzying set of statistics. The question has no definitive answer, because the Labor Department data shows only which industries are adding jobs, not what kind of jobs.
But the Kerry campaign's line does seem to hew more closely to the actual trend, and that suggests it could find more sympathetic ears among voters. The typical private-sector job created since December has been an industry job that pays an hourly wage of about $14.25, according to government numbers. Across the private sector, the average wage exceeds $15.
If the healthy job gains of the last few months continue, though, paychecks are almost certain to improve as well. Republicans are betting that they will and that Mr. Greenspan is correct about inflation remaining tame.
Gov. Bob Taft of Ohio, a Republican, said the biggest source of anxiety is the rapid pace of economic change, which has left many people wondering whether their jobs will be lost to a machine or another country.
"People feel an uneasiness because of the global economy we're living in," added Gov. John E. Baldacci of Maine, a Democrat. "That, more than anything else, clouds the recovery." As he spoke by telephone, he was traveling between two events - both celebrating Maine companies that were expanding their work forces.