On
the Campaign Trail
It’s
safe to say that the United States is on the eve of an election year unlike any
seen before. Fresh memories of events surrounding the 2000 presidential election
almost guarantee that the nation will pay close attention to the upcoming race
for president and control of Congress. The bumper crop of presidential hopefuls
is further proof that this election will be hard fought.
In recent years, politicians have begun to target messages to the so-called
“investor class,” who can expect to hear plenty about these issues.
Economic
Recovery
Throughout 2003, Americans consistently named the economy as the nation’s top
problem. However, perception sometimes matters more than reality.
In October, the number of Americans who described their confidence in the
economy as “poor” outnumbered those who described it as “good” or
“excellent” by three to one. But there is a raft of recent evidence
suggesting that the economy is on solid ground. For example, the 10 of the 12
Federal Reserve banks reported increasing economic activity in September and
October.1 And the economy grew faster during
the third quarter than it has for nearly two decades.2
Although investor optimism declined during the third quarter in most areas of
the country, the major stock indexes were all within positive territory for the
year.3, 4
This disparity between economic activity and sentiment will be fertile ground
for political rhetoric as some candidates point to what’s good about the
economy while others argue that times are tough.
Unemployment
More than 75 percent of Americans believe unemployment is higher than it was
three years ago.5 Yet there is evidence both to
support and oppose this belief. The Labor Department’s survey of employers
indicates a net loss of about 2.3 million nonfarm jobs, also referred to as
“payroll employment,” over the past three years.6
This figure has received much attention so far in the presidential race.
However, another measure of employment, Labor’s survey of households,
indicates a net gain of more than 600,000 jobs during the same period.7
The employer survey asks roughly 400,000 businesses how many people they employ,
while the household survey polls 60,000 households about job status. The latter
typically includes workers not on traditional payrolls, such as the
self-employed, consultants, and home-based businesses — a group that tends to
grow in the wake of recessions and a is leading indicator of payroll employment.
One other factor to consider is that the supply of workers has grown by 3.8
million during the past three years.8 Assessing
the labor situation is more complicated than simply evaluating the unemployment
rate, so investors should be prepared to hear varying interpretations of the
data.
Health
Care
Sixty-two percent of respondents in a recent survey said they would prefer a
universal health-care system to the current employer-based system.9
Health care has been a staple of campaign rhetoric for more than a decade. Even
though Congress is overhauling Medicare with a new system that includes
prescription drug benefits for the elderly, it’s likely that the debate
won’t stop there. The next battle line appears to be the role of business in
paying for workers’ soaring health insurance costs.
California, a frequent harbinger of change, has recently passed a law requiring
large employers to provide health insurance. Transit mechanics and grocery
workers went on strike in October over health care insurance costs — two
visible signs of disputes over health care.
Election activity in 2004 will be nothing if not exciting and omnipresent.
Investors will be bombarded with a range of information about issues that may
have serious long-term consequences.
1, 3, 5) The Gallup
Organization, 2003
2) CNN Money, October 30, 2003
4) Yahoo! Finance, 2003. Performance described is for the period January 1,
2003, to October 21, 2003. Stocks are represented by the Dow Jones Industrial
Average, S&P 500, and the Nasdaq Composite. The performance of an unmanaged
index is not indicative of the performance of any particular investment.
Individuals cannot invest directly in an index. Past performance is no guarantee
of future results.
6–8) Bureau of Labor Statistics, October 3 and 10, 2003
9) Investor’s Business Daily, October 21, 2003
© 2003
Emerald Publications
