May 10, 2004
Assessing President Bush's reelection chances based on the state of the economy, Bruce Bartlett says that Friday's employment report confirms that the economic expansion is accelerating:
- In April, 288,000 payroll jobs were created -- almost double the consensus forecast of 150,000.
- Coming on top of the 337,000 new jobs created in March (revised up from 308,000), the economy has now created 625,000 jobs in just two months.
- The economy has now averaged 5 percent real growth over the past year, and grew 4.2 percent in the first quarter of 2004.
Leading indicators are all pointing toward an acceleration of growth in the economy and jobs in coming months. For example:
- Initial claims for unemployment insurance have dropped steadily and are now at their lowest level since October 2000.
The insured jobless rate has fallen to 2.3 percent, the lowest level since the end of the recession in November 2001.
- The Institute for Supply Management, an industry group, has seen its manufacturing employment index jump to the highest level in 15 years, signaling growth in manufacturing employment of 50,000 per month.
- With goods-producing employment having risen by 124,000 in just the last 2 months, this forecast looks very good.
- The ISM's index of capacity utilization is up to 85.6 percent indicates a coming burst of corporate investment as businesses scramble to add new capacity.
Finally, the Congressional Budget Office reports that profits are rising so fast that corporate income tax revenues are 45 percent above their level this time last year, and CBO now sees federal revenues $30 billion to $40 billion higher than it anticipated.
Source: Bruce Bartlett, NCPA senior fellow, "Employment Surges," May 10, 2004.
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