The administration, and indeed, everybody within reach of a printing press or microphone, loudly gushed yesterday about third-quarter GDP growth. Is this 7% growth the turnaround the Bush administration needs, the proof of its faith-based tax cuts? Teddy at It’s Still the Economy, Stupid, wonders what the growth really means, and he’s done some research:
Outside of a freak quarter in 1950, the economy has NEVER grown above 3% for a 12-month period without adding jobs before Dubya was elected. And the Whistle Ass economy has managed to do this TWICE. In the third quarter of 2002, GDP growth was 3% over the previous year and employment had fallen 1%...
In a normal economy, GDP growth creates jobs as business needs more labor to expand production. Today, that doesn’t seem to be the case, and this has never happened in recorded economic history. So will more quarters like this create jobs? We’ll have to find out, but there are certainly plenty of impediments in the way. Capacity utilization is still under 80%. State and local governments are cutting their workforces to balance their budgets. Companies are still announcing layoffs to cut costs and recent surveys have not indicated they’re ready to do significant hiring.
The President if fond of repeating the mantra (in his special monotonous way) that tax cuts lead to consumer spending that leads to new jobs. But of this recent turnaround, the very best they could say is ”``as many as 1.5 million additional Americans could have lost their jobs” without the tax cut. Well, that’s conclusive: We have a maybe this helped, but according to according to Bush’s own economic advisor, they can’t even argue that case very strongly. And if consumer spending is all they’ve got, today’s news that September consumer spending dropped puts another big hole in the non-plan.