Job outlook: Mediocre at best

And it looks like the Bush plan isn't going to make things any better, especially in the high paying manufacturing sector:

The ballooning budget deficit hit a record $413 billion in 2004. It could lead to rising interest rates that limit business investment and slow production. But many economists say the deficit is not an immediate threat to job creation.

"In long run, yes, but in the next couple of years, probably not," said David Wyss, chief economist at Standard & Poor's in New York. "The biggest problem with deficits is you have to pay them back."

The trade deficit is of greater concern to some economists. U.S. manufacturers say China's practice of tying its currency, the yuan, to the dollar has undervalued China's currency by as much as 40 percent, giving companies there a huge advantage over U.S. competitors.

About 2.7 million manufacturing jobs have been lost since Bush took office and the shift of U.S. jobs to other countries was a major issue in the election, especially in Rust Belt states.

Morici predicted that the manufacturing sector "will continue to deteriorate to the point of peril. We are now losing our capacity to resurrect it if something is not done soon" to deal with China.

The trade deficit was running at an annual rate of $592 billion through September. That compares with last year's $496 billion. The administration has pressed China unsuccessfully to change its currency practices and has promised "to level the playing field."

Other economists say red tape is hurting U.S. companies' ability to compete globally and they praise Bush's goal of continuing to loosen government regulations.

The jobs market also has been shaky because of rising costs for health care and other benefits. Employers responded by working their existing employees harder to avoid increased expenses of new workers.

To control health costs, Bush wants to limit jury awards in medical malpractice lawsuits and to expand tax-free health savings accounts that can be used to pay medical bills. Economists doubt the measures would have much effect.

"I really do see what the president wants to do on health care ... as a fig leaf," Morici said.

Economists do not see much relief in the future from oil prices. Bush's energy plan, emphasizing drilling, exploration and production, would add some jobs. Bolstered by a larger majority, Republicans plan to make another push to open an Alaskan wildlife refuge to oil drilling. But Bush's energy plan falls short in conservation and alternative energy sources, which are longer-term problems, economists said.

Bush also wants to create "opportunity zones" to spur investment in needy communities through tax benefits. Economists don't expect the initiative to spark much overall job growth. Instead, it would send jobs to more needy areas of the country.

I guess tax cuts don't solve everything after all.