February 18, 2004

This analysis is a joint release by the Economic Policy Institute and the Center on Budget and Policy Priorities.

Contrary to reports, CEA predicted 3.6 million — not 2.6 million — jobs

would be created in 2004

By Jared Bernstein, Lee Price, and Isaac Shapiro

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This short analysis underscores several points concerning recent statements by White House press secretary Scott McClellan, Treasury Secretary John W. Snow, and Commerce Secretary Donald D. Evans, indicating the Administration is backing off the just-released jobs forecasts of its own Council of Economic Advisers:[1]


Understanding the 2.6 million prediction

On page 98 of the Economic Report of the President for 2004 that was released on February 9, the CEA predicts that non-farm payroll employment will average 132.7 million in 2004, reflecting a 2.6 million increase in jobs over its estimated average of 130.1 million in 2003.

There has been substantial confusion concerning this issue, with many analysts and stories incorrectly suggesting that the CEA projects a total of 2.6 million jobs to be created this year.  In effect, these reports are stating that the CEA has predicted there will be 132.7 million jobs at the end of 2004 when, in fact, the CEA has predicted that the average number of jobs for all of 2004 will be 132.7 million.  To reach this average figure, there will have to be many more jobs than 132.7 million in December 2004, as there are 2.5 million fewer jobs than that right now.

In Appendix Table A of our recent report, we estimated the job growth path that would be consistent with the CEA’s projections.  We found that the CEA assumed that jobs would grow at an average pace of 300,000 per month from November 2003 through December 2004.  The CEA assumption is consistent with job growth patterns coming out of past recoveries.

In part because job growth has been tepid in the three months since the CEA’s projections were made, to achieve the estimate of 132.7 million jobs during 2004, an average of 460,000 jobs a month would need to be created from February through December of 2004.[4]  In other words, about five million jobs will need to be created between now and the end of the year to hit that projection.

End Notes:

[1] Terence Hunt, “White House Backs Off Job-Growth Forecast,” Associated Press, February 18, 2004; and Edmund L. Andrews, “2 Bush Officials Cautious on Job-Growth Forecast,” The New York Times, February 18, 2004.

[2] Reuters News Service, “White House advisor says sees big job gains in 2004,” February 10, 2004.

[3] Jared Bernstein, Lee Price, and Isaac Shapiro, Missing the Moving Target, Center on Budget and Policy Priorities and Economic Policy Institute, February 12, 2004.

[4] There has been a recent downward technical adjustment of 188,000 to October 2003 employment levels whose precise nature was unavailable to the CEA when they made their published projections.  If CEA’s projections are adjusted downward to take into account this technical adjustment, then it would have predicted 132.5 million jobs, on average, in 2004.  To reach this average, job growth would have to average 425,000 over the next 11 months.