For this Bush, time may be on his side

By Charles Stein, Globe Columnist, 9/7/2003

In economic terms, 2003 is starting to remind me a lot of 1992. If I'm right -- a big if -- then President Bush stands a good chance of avoiding the same fate his father met. Let me explain.

The first President Bush showed up at exactly the wrong time. Soon after he took office, the boom of the 1980s gave way to the bust of the early 1990s. The jobless rate rose, consumer confidence plunged, and the economy contracted.

Conditions began to improve in 1992, but the first signs of growth were underwhelming. "People did not quite believe that the economy had found its footing," said Mark Zandi, chief economist at Economy.com.

Part of the problem was statistical. When they were first reported, the growth figures in 1992 looked puny. In each of the first three quarters of the year, gross domestic product expanded at less than a 3 percent annual rate. Subsequent revisions of the numbers showed growth was actually quite respectable -- between 3 and 4 percent -- but the revisions came too late to help Bush.

So did the improvement in the job market. The national unemployment rate peaked at 7.8 percent in June 1992. By Election Day the rate declined to 7.4 percent. New jobs were being created. The economy was expanding, as it would continue to do for the next eight years. "The Democrats keep telling us that everything is going to hell. They're wrong," Bush complained during the campaign.

He had a point, yet it didn't matter. Simply put, the recovery started too late for the president to save his job.

Flash forward to the administration of the second President Bush. Like his father, the current president picked a rotten time to start his new job. The boom of the 1990s was over, replaced by a bust in the stock market and the economy. The nation shed jobs in 2001, 2002, and again this year.

The economy has been growing, but at an unimpressive pace. Until recently. In the second quarter, growth came in at a solid 3.1 percent clip. This quarter will be significantly better. "This could be a blowout quarter," said Allen Sinai, chief economist at Decision Economics in New York.

The signs of improvement are hard to miss. Wal-Mart is selling more goods; car sales in August were exceptionally strong; orders to American factories are finally picking up; high-tech companies such as Intel are revising their earnings forecasts higher.

Just as important as the strength of the recovery is its timing: The recovery is beginning more than a year before Election Day 2004. "With this much lead time, the recovery should be something people can feel by next year," said Nariman Behravesh, chief economist at Global Insight in Lexington. In other words, we should have a recovery that's recognizable by people other than economists.

Behravesh's prediction rests on two assumptions: that the expansion will continue and that eventually it will start producing jobs. The jobs aren't here yet. In the second quarter, the economy expanded even as companies cut their payrolls. In August, 93,000 more jobs disappeared, a surprisingly poor performance. American firms are getting more productive. They can do more with less. In the long run that should be a good thing. In the short run it doesn't do anything for the unemployed. In the most recent consumer confidence survey, 34 percent of those polled said jobs were "hard to find."

Most economists say things should get better. They expect the job market to revive in the coming months as companies become more confident that the recovery is the real deal. President Bush apparently is using a similar forecast. In a speech in Kansas City last week he declared that the country is heading in the right direction toward "greater prosperity and more jobs."

The economy won't be the only issue next November. The war on terrorism will count too. But to win reelection, the president may need to show some tangible economic progress. He has roughly a six-month headstart on his father. It will be interesting to see whether that is enough.

Charles Stein is a Globe columnist. He can be reached at stein@globe.com.