Saturday, December 03, 2005

U.S. Economy Is Strong

Despite gasoline prices that remain a good bit higher than a year ago, and the continuing efforts of Democrats to cast every aspect of life as miserable so long as George Bush is President, the U.S. economy remains strong.

The U.S. Unemployment Rate, which is the standard by which many people judge the condition of the economy, stands at 5.0 percent as of the end of November. This is a good rate, just under the average Unemployment Rate from 1990 – 2004 of 5.57 percent.

A common misconception is that full employment means that everyone who wants to work or is willing to work has a job, and the Unemployment Rate at full employment would be zero. Suffering under this erroneous concept, 5 percent unemployment seems not just high, but very high. However, historically the country has never enjoyed full employment. The lowest unemployment Rate since 1948 occurred in May and June of 1953, when it stood at 2.5 percent. At full employment, the Unemployment Rate is somewhere between 2% and 7%, depending upon various circumstances, and economists Jared Bernstein and Dean Baker put it at no higher than 4 percent. So, currently the Unemployment Rate is one percentage point higher than the Full Employment Unemployment Rate identified by Bernstein and Baker, but is lower than the 15-year average rate since 1990. It’s a tough sell to use that statistic to beat up on George Bush.

Other economic factors also point to a strong economy. Some 876,000 jobs have been created since June, average hourly earnings have risen 25 cents since June to $16.32, and Productivity rose in June by 2.1% for the 2nd Quarter and by 4.1% in September for the 3rd Quarter. Increased revenues attributed to Mr. Bush’s tax cuts reduced the budget deficit by $94 billion this past fiscal year.

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