In and out of recovery

The Labor Department issued its June employment report Friday morning. Right on cue, the White House Web site trumpeted the news. Nonfarm payroll jobs grew by 132,000 in June, and have increased by 8.22 million since August 2003. That was the month nonfarm payrolls reached their nadir in the Bush administration, having declined by 2.653 million since January 2001. In its Web site press release, the White House said ” eal wages rose 1.1 percent over the 12 months ending in May.” Unmentioned was the fact that average real wages in May were lower than they were four years earlier (and lower than they were in August 2003, when the labor market supposedly turned into gold).

The White House also celebrated the fact that the “economy has now experienced over five years [specifically, 21 quarters through March] of uninterrupted growth, averaging 2.9 percent a year since 2001.” The eight-month recession in 2001 ended during the fourth quarter. Unmentioned was the fact that there has not been a single 21-quarter period following the trough of any of the previous nine post-World War II recessions during which economic growth has not averaged more than the 2.93 percent it has averaged during the 21 quarters ending in March. Specifically, from a June 28 analysis — “How Robust Is the Current Economic Expansion?” — by the Center on Budget and Policy Priorities (CBPP), here are the average annualized growth rates over 21 quarters for the previous nine postwar expansions beginning during the year indicated: 1949, 5.59 percent; 1954, 3.54 percent; 1958, 4.76 percent; 1961, 6.01 percent; 1970, 3.47 percent; 1975, 3.65 percent; 1980, 3.6 percent; 1982, 4.8 percent; 1991, 3.19 percent. The average of those nine growth rates 4.29 percent, which is nearly 50 percent faster than the 2.93 percent that the White House is celebrating. The expansions following six of the nine previous postwar recessions ended before the 21st quarter. That means that the subsequent economic downturns still did not preclude annualized growth rates over 21 quarters from exceeding the 2.93 percent growth rate of the current expansion.

The study of postwar expansions by the CBPP (which, upon request, immediately e-mailed all of its background spreadsheets for perusal by The Washington Times editorial page) examined six other important economic statistics: business investment, nonfarm payroll employment, personal consumption expenditures, wages and salaries, net worth and corporate profits.

Compared to an annualized average of 5.85 percent during the 21 quarters following the previous nine postwar recessions, business investment has grown by 3.22 percent during the current expansion. Thus, business investment expanded on average more than 80 percent faster during the previous nine recoveries compared to the current one. During the three “long” postwar expansions in the 1960s, the 1980s and the 1990s, business investment increased an average of 7.74 percent over the first 21 quarters. That’s nearly two-and-a-half times as fast as business investment has been growing during the current recovery.

Incorporating the June employment data, CBPP has calculated that payroll employment during the 67 months since the 2001 recession ended in November 2001 has grown at an average annual rate of 1 percent. For the nine previous postwar expansions, payroll employment during the first 67 months following a trough grew at an average annual rate of 2.5 percent, or 150 percent faster than employment has grown during the Bush recovery. During the nine previous expansions, the inflation-adjusted wages-and-salaries component of national income increased at an average annualized rate of 3.8 percent over the 21 quarters after the troughs. That is twice as fast as the annualized 1.9 percent increase during the Bush expansion. The Bush-era growth rate for wages and salaries, like the Bush rates for economic growth, business investment and employment, is the lowest of the 10 postwar recoveries. Also ranking dead last is the Bush expansion’s growth in consumption (3.2 percent per year), despite the fact that the personal savings rate has been pushed into negative territory for each of the last eight quarters. Meanwhile, inflation-adjusted total household net worth has increased at an annualized average rate of 3.68 percent since the 2001 recession ended. That’s less than the average annual rate of 4.06 percent that prevailed during the 21 quarters following the previous nine recessions.

Among the seven economic statistics examined by CBPP, only inflation-adjusted corporate profits, which have increased by 12.22 percent per year during the Bush expansion, have performed better than the average annual increase (7.67 percent) during the prior nine recoveries.