Wampum

If it looks like a duck, and walks like a duck...

It still might not, in fact, be a duck.

For over a year now, I've pointed out the striking similarities, at least utilizing the lens of print media, between the first and second Bush Administrations. While everything from the players (Bush, Cheney, Card, Bolton, etc.) to the issues (Iraq, recession, the deficit) feel amazing like we're in fact living in a "do over", a closer look at some of the specifics may predict a somewhat different outcome for Bush Jr. This in particularly true of the economy.

The administration of George Herbert Walker Bush also saw a widespread recession take hold in the midst of his first term as president; nearly 1.4 million jobs, primarily in manufacturing, were lost, as unemployment climbed to 7.8% in June of 1992. Present-day analysts will often point to the poor economy, as evidenced by the high jobless rate, as the reason why Bush Sr. lost his re-election bid to Gov. Bill Clinton. Many of those same talking heads now insist that with a purported economic recovery in full bloom, Bush Jr. may well be able to avoid the same fate as his father. However, a couple of headlines I ran across during Friday's trip into deja-vu-land piqued my curiosity:

TWO MORE REPORTS SIGNAL RECOVERY
Dave Skidmore, Associated Press
March 5, 1992

WASHINGTON -- Orders to US factories rose for the third time in four months and the percentage of homeowners behind on their mortgages fell, according to two reports yesterday that observers said signaled a slowly emerging economic recovery. Automakers, meanwhile, said February sales of North American-made cars and trucks rose modestly from a year ago.

Treasury Secretary Nicholas Brady said the January gain in factory orders should be followed by an "increasing number of...

ECONOMIC REPORTS PROVIDE A HINT THAT RECOVERY IS COMING
Charles Stein, Boston Globe
March 4, 1992

A fresh round of national economic reports released yesterday showed signs of an economy on the mend and hinted that a real recovery could begin within the next few months. The government's chief economic forecasting gauge showed its biggest jump in six months while new home sales recorded their largest rise in 13 months. The nation's purchasing managers said on Monday that the economy expanded sharply in February.

"As we look ahead there are a few hopeful signs," Alan...

In both cases, the headlines rang true - an economic upturn was in fact on the horizon, gaining steam throughout much of the summer and fall of 1992. The housing sector, manufacturing and retail sales all saw substantial gains as Bush Sr. moved towards re-election. Even employment, always a "lagging" indicator, showed improvement; from March until November, 1992, the economy added over 800K jobs, pushing Bush's track record for job creation back into positive numbers.

So why do present day analysts focus on the climbing unemployment rate as a factor in Bush Sr.'s defeat? And what are the implications for Bush the Younger tying his re-election hopes on American's paying more attention to the unemployment rate than the number of jobs actually created? The charts below tell an interesting story:

Under George H. W. Bush's watch, the unemployment rate shot up as more people entered the workforce after the recession. This most likely occurred as public confidence in the recovery buoyed the unemployed to start pounding the pavement in hopes that companies were hiring again. Such is the argument the current Bush Administration attempted to make back in November, 2003, but it's now clear that it was merely a slight uptick in an otherwise downward trend.

Unfortunately for Bush Jr., he's stuck between a rock and a hard place; should public confidence turn positive again, the large numbers of workers currently labelled as "discouraged" and thus not counted in the labor force could move back into the job seeking category, pushing the unemployment rate up, unless companies start hiring en masse. However, with productivity at record highs (along with the cost of hiring new workers, particularly health benefits) there is little chance of that happening anytime soon. Thus, the combination of long-term unemployment creeping further into the "middle class" and no new job prospects on the horizon may cause consumers to clamp down on their spending, choking off the recovery. Add to that stagnant wages for average workers and climbing energy costs, and an unemployment rate of 4% might not cheer the increasingly disgruntled electorate.

It's obvious that this Administration only has a very short period of time to turn things around. Probably a month or two at the most.

Posted by MB Williams at March 5, 2004 07:19 AM | TrackBack