Fridayís job report shows that White House economist Greg Mankiw was very nearly right when he projected almost a year ago that jobs could rise by 2.6 million in 2004. Of course, he was widely ridiculed inside Washington after making this statement, and at one point even the White House turned its back on the Harvard professorís estimate.
But the Labor Departmentís latest employment release shows the yearly gain for nonfarm payrolls coming in at 2.3 million. Thatís close enough for government work. Itís also the best jobs performance in five years.
Why so good? The labor market responded powerfully to lower personal tax rates. As workers were able to keep more of what they earned, the unemployment rate declined from 6.3 percent to 5.4 percent. A full 2.5 million jobs were added since August 2003.
Mainstream economists continue to scoff at the economic power of lower marginal tax rates. But once again a supply-side experiment worked. For all of 2004, nonfarm job additions averaged just under 200,000 per month. At this rate, 2005 will be another banner year for employment and economic growth.
"The budget should be balanced, the treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt." Marcus Tullius Cicero, circa 63 B.C.