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Job Growth Sluggish as Bush Trumpets Economy

As officials boast of tax cuts' success, Labor Department figures show lower than expected employment gains in December.

January 07, 2006|James Gerstenzang and Joel Havemann | Times Staff Writers

CHICAGO — President Bush, Vice President Dick Cheney and about two dozen administration officials fanned out around the country Friday to promote their economic stewardship, but new economic data gave them lukewarm evidence of good times.

Hours before Bush told the Economic Club of Chicago that "the American economy heads into 2006 with a full head of steam," the Labor Department reported that job growth sagged to 108,000 new jobs in December, its lowest level in about a year and a half, except for the months buffeted by hurricanes Katrina and Rita.

But December's job gain, which was about half of what had been expected, was partly offset by news that employers had added 71,000 more jobs in October and November combined than previously reported. And the unemployment rate declined from 5% to 4.9% in December, largely because of an unexpected fall in the number of teenagers in the workforce.

The job picture showed "decent but not stellar economic growth," in the words of Nigel Gault, U.S. economist with the consulting firm Global Insight in Lexington, Mass.

The Dow Jones industrial average, the Nasdaq and the S&P 500 stock indexes closed Friday at their highest levels since mid-2001, as analysts said they saw little in the report that could prompt the Federal Reserve to continue its campaign of raising interest rates over a prolonged period.

While several analysts said they expected Fed policy-makers to increase rates by a quarter-point at their next meeting, on Jan. 31, a report of heated job growth might have led to inflation fears and to expectations that the Fed would extend its rate increases further.

While Bush spoke in Chicago, the administration sent the secretaries of Labor, Energy, Commerce and the Treasury on speaking trips, and 18 of their senior aides were dispatched from coast to coast. Cheney, joining the administration's blitz, visited a Harley-Davidson motorcycle factory in Kansas City, Mo., using a cane because of what spokeswoman Lea Ann McBride said was a recurrence of "a pre-existing foot condition."

The president and other delegates urged Congress to make permanent the tax cuts that it enacted in Bush's first term, many of which are due to expire in the next few years. "This economy is strong, and we intend to keep it that way," Bush said, adding that the tax cuts deserved credit.

"In 2005," the president said, "the American economy turned in a performance that is the envy of the industrialized world, and we did this in spite of higher oil prices and natural disasters. We're strong, and I'm optimistic about the future of this economy."

Public opinion polls indicate that a majority of Americans do not share the president's enthusiasm. In one recent ABC News/Washington Post poll, 60% rated the economy as "not good" or "poor." GOP lawmakers complained late last year that Bush was not talking enough about the strength of the economy.

Tony Fratto, a Treasury spokesman, said Friday's public relations offensive was designed to address the "disconnect" between the economy's performance and the public's perception.

"If you ask most Americans, even if they're doing fine, they have a sense the economy's not doing that well," Fratto said. "We want to make sure we're getting out there and telling the story of just how well this economy is doing."

In Chicago, Bush noted that Americans' per-capita after-tax income had grown 7% during his time in office -- although he did not point out that median household income before taxes had fallen by about 4%.

"The American economy grows when the American people are allowed to keep more of their own money," Bush said. He argued that by cutting taxes, the government generated so much economic growth that it collected more income tax revenue than it would have without the tax cuts.

Cheney, following the same script, said in Kansas City: "Some in Washington said these tax cuts would not work." But with 4.6 million new jobs since May 2003, he said, "it's getting pretty hard for the critics to make the case that somehow these tax cuts weren't good for the economy." Democrats begged to differ. Senate Minority Leader Harry Reid of Nevada issued a statement accusing the Republicans of pursuing "tax breaks for millionaires and the special interests" while ignoring the plight of the middle class.

Analysts said the actual state of the economy lay somewhere between the administration's rosy account and the Democrats' gloomier one. "The surprise," said Sung Won Sohn, president and chief executive of Hanmi Bank in Los Angeles, "has been the resilience the economy has shown despite the hurricanes, the jump in oil prices and higher interest rates." But he found some bearish signs in Friday's report, including a decline in the total number of hours worked and a shrinking share of industries hiring new workers.

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