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President George W. Bush
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Welcome to "Ask the White House" -- an online interactive forum where you can submit questions to Administration Officials and friends of the White House. Visit the "Ask the White House" archives to read other discussions with White House officials.

Dr. Greg Mankiw, President's Economic Adviser
December 5, 2003

Greg Mankiw
Hello, it's nice to be back here to discuss recent economic developments and the President's economic policies. I look forward to taking your questions.

Scott, from Cambridge, Maryland writes:
Greg As you know, the unemployment rate dropped again, but the jobs increase was less than expected. Were you surprised with today's news? Is it a sign that the recovery isn't very strong after all?

Greg Mankiw
According to today's news, employment as measured by firm payrolls increased by 57,000 to a total of 328,000 over the past four months. The unemployment rate as measured by a survey of households fell to 5.9 percent from a peak of 6.4 percent several months ago.

This is good news but there is clearly more work to be done. The President and his economic advisors will not be satisfied until every American who wants a job has one.

Tyler, from Rockville writes:
Does today's news signal to you that this continues to be a jobless recovery?

Greg Mankiw

The labor market has been lagging behind other economic indicators . That is not unusual by historical standards. Statistical analysis suggests that employment lags behind growth in real GDP by about 3 - 6 months. If historical patterns continue to hold, the rapid real GDP growth we experienced in the 3rd quarter should be a sign of employment gains looking ahead.

David, from Coatesville writes:
Could you please give an accurate analysis of unemployment picture, focusing on the labor market strength in manufacturing and service industries. Please reference the areas that there is a demand for labor and also sectors that are losing favor in our current economy.

Also, could we put an end to after hours trading in the market? It is unfair.

Greg Mankiw
Hi David,

Manufacturing has been hit particularly hard during this economic downturn. That is in large part because this decline in production has been concentrated in business investment and exports. These two componoents of GDP originate in manufacturing firms. The good news is that there are signs that manufacturing is picking up. A survey of purchasing managers in manufacturing released earlier this week indicate that manufacturing is growing at its fastest rate in 20 years.

Regarding after-hours trading, you are right that it is unfair and wrong. The SEC has the tools to deal with this important problem and I'm sure it will.

Steve, from Cleveland, Ohio writes:
Hey Mr. Mankiw Help me out. I told my girlfriend to watch today's Ask the White House. She's never seen it before, but she promised me she would log on.

Anyway, I want to ask her a question. Marisa, I love you. I would move to Cincinatti if you marry me (but I will never be a Bengals fan).

Please email Greg your response. (Greg -- if she emails a "no" response --please don't post it).

Greg Mankiw
Good luck, Steve and Marisa. As someone who has been happily married since 1984, let me give you a piece of advice. I suggest you avoid using "Ask the White House" to negotiate future marital issues. But please do continue to tune in.

Greg, from Chicago writes:
Greg, Because applications for jobless benefits have been below 400,000 for more than two months, does this signal to you that the jobs market is turning around?

Greg Mankiw
There are many indicators of labor market conditions. What is not widely known among non-economists is that the employment report released this morning is really two reports. One is the survey of firms, called the "payroll" or "establishment" survey. This is where we get the number of people employed and jobs created. The other is a survey of households. This is where we get the unemployment rate.

A third measure of labor market conditions is initial claims for unemployment insurance, released every Thursday. This number has been trending down over the past couple of months, which is indeed an indicator that labor market conditions are improving. I hope and expect that this will continue to be the case in the weeks ahead.

Stacia, from Binghampton, NY writes:
A senior economist at Morgan Stanley today said that the reason job growth is slower than expeted is due to "the trend toward outsourcing jobs and the nagging influence on the travel sector of the Sept. 11, 2001 terrorist attacks."

Do you agree?

What is your general feeling about outsourcing jobs?

Greg Mankiw
The 9/11 terrorist attacks have certainly been one of the shocks that the economy has had to deal with over the past several years. On top of the end of the high-tech bubble and the corporate governance scandals, they have acted to depress economic activity. Expansionary monetary policy and the President's pro-growth tax relief have mitigated the impact of these shocks. Without these policies, the unemployment rate would very likely have gone much higher than the peak of 6.4 percent.

Outsourcing is a particular type of international trade. We are used to trade in goods, but trade in services has expanded recently, made possible in large part by advances in telecommunications. Like all forms of international trade, outsourcing benefits an economy overall, though there are also short-term costs as workers are displaced. These costs are real, and the President has policies to help ease the transition -- to help people find jobs. But overall, expanding trade is good for economic growth and for American living standards.

corrado, from new york city writes:
is the extraordinary growth in productivity helping job growth or on the contrary american companies are using it to squeeze more our of their workforce. In a word, is this incredibile productivity spur counterproductive for american workers?

Greg Mankiw
Rapid productivity growth is good for American workers. The growth in real wages (that is, wages adjusted for inflation) is determined primarily by growth in the productivity. Firms are able and willing to pay their employees more when those employees are able to produce more goods and services. It is the high productivity of the American workforce that gives us our high standard of living.

High productivity growth does mean, however, that we need more rapid economic growth to get employment growing again. In a sense, it raises the bar for growth to create jobs. At the same time, it makes the economy stronger and more able to grow quickly.

Jillian, from Providence, Rhode Island writes:
Dr. Mankiw, Im writing a paper for economics and I was hoping that you could help me understand a few concepts regarding Bush's tax cuts:

Were Bush's tax cuts intended to stimulate the economy in short term or long term growth? Have they accompished their goals? Why or why not?

Greg Mankiw
The President's tax relief packages have been aimed at both stimulating the economy in the short run and providing an environment to foster improved long-run economic growth. Tax policy should be made with an eye on both of these time horizons. If you want to learn more about this issue, take a look at the talk I gave to the National Association of Business Economists, on the CEA website.

As I mentioned in response to an earlier question, the economy is stronger today because of these tax cuts. I believe that we will continue to reap the benefits of them in the months and years to come.

Michael, from Lawrence, KS writes:
Mr. Mankiw - How often do you meet with the president in the Oval office to discuss economic issues. Thank you.

P.S. Will you pass it on to the President and the person in charge of "Ask the White House" that we'd like to see a secret service agent host ask the White House.

Happy Holidays

Greg Mankiw
I talk with the President on average a couple of times a week. He is very focused on the economy, and has told me many times that his most important economic priority is job creation for Americans.

I will pass along the request. Keep in mind, though, that it's called the Secret Service for a reason.

Stephen, from Diegueo Middle School writes:
I am an 8th grade United Stated History teacher and my students have just finished learning about the American Revolution. On 12/17/03, we will be having a Socratic Seminar on the impact of the economic decisions made by politicians. I would appreciate it, ifyou could provide my students with your perspective on the questions listed below

Why do you think cutting taxes will produce economic growth?

If the economy does grow, how will that help to alleviate deficit spending and lower our national debt?

Can economic growth alone erase our national debt?

Greg Mankiw
Hello to everyone at Diegueo Middle School.

I answered a question about taxes already. Regarding the national debt: the deficit is a concern, and the President has said that he wants it to shrink. Under the President's Budget, the deficit will shrink in half over the next five years. This will come about through more rapid economic growth, which will bring in tax revenue, and through spending restraint.

Greg Mankiw
We still have not heard back from Marisa. Good luck, Steve. Thanks again for the perceptive questions. I look forward to doing it again.

Happy holidays to everyone, Greg

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