Magazine article Insight on the News

Good Economy Puts Democrats in Quandary

Magazine article Insight on the News

Good Economy Puts Democrats in Quandary

Article excerpt

Byline: Jamie Dettmer, INSIGHT

The sudden acceleration in what until the fall had been a very sluggish economic recovery has left many Bush aides and election strategists punching the air with excitement and relief. Their confidence has rebounded and they are persuaded now that even with problems in Iraq the president is sitting pretty when it comes to his re-election bid. White House incumbents, they point out, fare well when slumps start shifting into recoveries.

The White House indeed has had plenty of stunning economic figures to savor. The Commerce Department reported an 8.2 percent annual growth rate for gross domestic product for the third quarter the highest since the first quarter of 1984. And the productivity of U.S. business has jumped to heights not seen in two decades, recording over the summer an annualized gain of 9.4 percent.

Not to be outdone by government statistics, the Institute for Supply Management has announced that the manufacturing sector enjoyed its best month in November since December 1983, with 18 of the 20 industries in the sector enjoying growth.

While job growth has been disappointing, many economists now believe job gains are just around the corner. "Businesses have been able to increase margins and hold prices down," said Sung Won Sohn, chief economist at Wells Fargo Bank. "This is very good news for the economy as well as corporate profits. But employers have probably squeezed as much as they can out of this orange." In other words, there are limits to how much productivity can be improved and the time is fast approaching when businesses will have to add employees.

"You can do that for only so long before you exhaust your workers," said Stephen Stanley, senior market economist for RBS Greenwich Capital.

"They are going to have to start hiring."

So the good times are set to roll again? President George W. Bush can expect re-election on the back of a rapidly improving economy? The answer to both is, "Yes, but ... " There will be a time lag before struggling Middle America starts perceiving and feeling the benefits of an economic resurgence, as happened with the slow-motion recovery in 1992. Despite Democratic propaganda at the time, there was an economic turnaround under way as the nation went to the polls to pick between Bush pre, Bill Clinton and Ross Perot, but voters weren't yet aware of feeling the recovery in their pocketbooks. The rest is history, as they say.

However robust the economy is next year, the net loss in payroll jobs since the year 2000 won't be made up by Election Day. …

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