Politics & Policy

The Clinton Manufacturing Recession

Bush inherited this job-challenged economy.

Gross Domestic Product has expanded six consecutive quarters and industrial production grew in 2002. But total non-farm payroll employment has declined by 2.1 million jobs since its peak in March 2001, leading critics to pin the decrease on President Bush and to describe the current economic situation as a “jobless recovery.”

But closer examination of the employment data shows that if blame is to be awarded, it should go to ex-President Clinton. The data also reveal the need for the Bush tax cut.

Job losses are concentrated in the economy’s manufacturing private industry sector, which peaked in April 1998 on Clinton’s watch. In the ensuing five years, 2.6 million manufacturing jobs (14 percent) have disappeared.

You can call this the Clinton Manufacturing Recession — and it’s the major reason why total non-farm employment has not grown.

The services-producing sector — 82 percent of the economy — has created 353,000 new jobs under President Bush since reaching a trough in December 2001. Job growth is spread across two private-industry sectors: services and the sector that includes finance, insurance, and real estate (FIRE).

The National Bureau of Economic Research, the official arbiter of cyclical turning points, has said the economy reached a peak in March 2001. FIRE employment was 7.6 million in March 2001 and has grown to 7.8 million as of April 2003. Services employment was 41 million in March 2001 and has edged up to 41.4 million as of last month.

Growth in the services sector under President Bush has been greatest in the area of health and education. Gains have also occurred in engineering and management services, a hi-tech component. Government employment, counted in the services-producing sector, has also grown, but the largest gains are in non-federal employment.

Not every services-producing industry sector has grown under President Bush. Declines occurred in retail and wholesale trade, as well as transportation and public utilities. But these drop-offs pale in comparison with the manufacturing job losses that started under Clinton.

Nondurable manufacturing employment peaked at 7.9 million workers in January 1995. Components that peaked under Clinton included: food and kindred products (October 1995); textile mill products (November 1994); printing and publishing (May 1998); and rubber and miscellaneous plastics (February 2000). Many of these jobs were once concentrated in the South.

Durable manufacturing peaked at 11.2 million workers in April 1998. Components that peaked under Clinton included: lumber and wood (February 2000); furniture and fixtures (July 2000); primary metals (January 1998); fabricated metals (July 2000); industrial machinery and equipment (March 1998); electronic and other electrical equipment (November 2000); transportation equipment (October 1998); instruments and related products (March 1998); and miscellaneous manufacturing (April 1998). Some of the largest durables goods employment is in the upper Midwest.

No manufacturing component has peaked under President Bush. Stone, clay, and glass — a durable component — peaked in January 2001, the month Clinton left office. Six other manufacturing components peaked pre-1993.

President Bush inherited an economy on the brink of recession. Employment in the goods-producing sector (manufacturing, construction, mining) and industrial production peaked under Clinton. GDP contracted for three quarters in 2001 but has expanded for six quarters under President Bush. Yet total non-farm employment has not grown due to manufacturing job losses. Far from a “jobless recovery,” the economy is suffering from the Clinton Manufacturing Recession, and is in need of fiscal stimulus.

— Greg Kaza is executive director of the Arkansas Policy Foundation, a non-profit economic research organization in Little Rock.

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