Job losses put Bush on defensive

"For seven straight months, businesses have had to cut the number of jobs available in this bleak Bush economy. At this rate, there will be only one job left to cut by November 2004: George Bush's"

Joseph Lieberman, US senator

Friday's unexpectedly bad employment report dashed the White House's hopes of going into the heat of the presidential campaign with clear evidence of an economic turnaround and forced President George W. Bush onto the defensive over his reliance on tax cuts as a remedy.

In a speech here hours after the government announced that the economy had lost 93,000 more jobs in August, Bush remained upbeat. He said that if Congress wanted to help it should make the recent tax cuts permanent and enact other parts of his agenda, from limiting lawsuit awards against doctors and companies to allowing more domestic oil and gas drilling and easing regulations on businesses.

"We've taken steps to get our economy growing again, and there are some very hopeful signs that progress is being made," Bush told a cheering crowd of supporters at an industrial warehouse here. "Yet, today's unemployment report shows we've got more to do. And I'm not going to be satisfied until every American who's looking for a job can find a job."

But he offered no new initiatives, and with the budget deficit surging, a trend that is accelerating as the costs of occupying and rebuilding Iraq continue to grow, his ability to offer any expensive new proposals will remain limited.

Bush has already pushed three tax cuts through Congress in three years and sold them as the best solution to the economy's short-term problems. Now, having wedded himself to that policy, his political fortunes in 2004 depend to a large extent on whether a rebound in economic growth will reverse, by the time voters start making up their minds, the steady slide in employment that has plagued the US through the first two and a half years of his presidency.

The Democratic presidential candidates seized on the employment report as further evidence of Bush's economic mismanagement. Since Bush took office, the economy has lost nearly 2.7 million nonfarm jobs, and last month's job losses were the worst since March, according to the Labor Department.

"For seven straight months, businesses have had to cut the number of jobs available in this bleak Bush economy," said Senator Joseph I. Lieberman. "At this rate, there will be only one job left to cut by November 2004: George Bush's."

Bush shot back at the critics, defending his tax cuts in particular as the right medicine at the right time.

"Tax relief means new jobs for Americans," the president said.

But the economic news provided evidence to those economists who think the economy will be slow to add new jobs and put new pressure on a White House that is already struggling to keep Bush's standing as commander in chief from being diminished by the continued bloodshed in Iraq.

Clearly hopeful that the latest round of tax cuts would diminish the role of the economy in the presidential race, Bush had spent much of the summer, including portions of what the White House called his "working vacation" on his ranch in August, serving up a message of cautious optimism.

But many economists are doubtful that the economy, while increasingly robust in many ways, will begin generating large-scale employment gains anytime soon. If their assessment is correct, it raises the prospect of a jobless recovery in the 14 months left until Election Day.

In his speech, Bush repeated his standard line that he remains unsatisfied with the extent of the economy's rebound, even in light of the one piece of good news in Friday's jobs data, the decline in the unemployment rate to 6.1 percent from 6.2 percent, the second consecutive monthly drop.

He did not mention the new elements he has added to his defense of his economic record in recent weeks. They include his suggestion that China is hurting US workers by keeping its currency deliberately undervalued and his announcement on Monday that he would appoint an official in the Commerce Department to help manufacturers, who have been hardest hit by the recession and the sluggish recovery. His critics have called those steps window dressing.

By some measures, Bush can point to progress on the economy. Growth is picking up, the stock market has rebounded somewhat and one of the most important measures of the economy's long-term prospects productivity growth, or the increase in how much of a product or service each worker can produce is surging.

But as far as employment goes, the economy is to some degree a victim of its own success. Because companies are able to produce more goods and services with fewer or the same number of people, they have less reason to start hiring even as demand for their products increases.

"We're having a good recovery, with growth through productivity, which is good for corporate profits," said Paul McCulley, chief economist at Pimco, a bond trading firm. "But corporate profits don't vote."

Also See Story:
US jobless figures are a nasty surprise