Shoring the Recovery
THE United States economy continues to show signs of strengthening. As it does, the economic rationale for President Clinton's stimulus package may seem to be disappearing. But it is not. Hidden behind the recent flurry of encouraging statistics are factors suggesting that the recovery could use some help:
* Unemployment: January's rate fell from 7.3 to 7.1 percent - the lowest level in a year. But the drop was due almost wholly to 500,000 people who stopped looking for work.
* Payroll employment: This grew by 106,000 jobs in January, in contrast to an average rise of 50,000 jobs per month last year. The increases spread to the highest proportion of industries since 1990. But at this stage in a typical recovery, payroll employment grows by 200,000 to 300,000 jobs each month.
* Productivity: 1992 turned in the best performance in 20 years, with a 2.7 percent increase. The fourth-quarter gain was even better, at a 4 percent annual rate. Over the long haul, those increases will help keep US industries competitive. The immediate result, however, is that businesses do not hire as many employees.
Two further points: Productivity increases are typical coming out of a recession as employers, uncertain about a recovery's durability, keep their smaller work force on overtime; and many companies, large and small, have restructured, laying off not just blue-collar employees, but white-collar workers as well.
In some cases jobs will return as employers realize that they can't continue to meet production needs with overtime. That point may be near for some firms; the factory workweek rose in January to a 25-year high. But the jobs lost to restructuring and technological improvements on the shop floor are gone for good.
Among the squadron of trial balloons Mr. Clinton's team lofted last week was an economic stimulus package reported to include $16 billion in new spending and $15 billion in tax breaks designed to spur investment and research. It heads in the right direction.
Its economic virtue is its modesty: At $31 billion, it is large enough to give the recovery something of a boost should it begin to falter, but small enough in a $6 trillion economy that it is unlikely to touch off a round of inflation if the recovery gathers more steam on its own. And it focuses on the future - job training, infrastructure improvement, investment, and research.
Its political virtue is its activism: Americans elected Clinton to do something about the economy and the deficit.
The package accomplishes the former and serves as a sweetener for the bitter choices that come with the latter.