4.7% Unemployment is Good News

Unemployment is at 4.7%. While we are at war now, the U.S. still enjoys a peacetime economy, without the manpower shortages war in Korea and Vietnam produced.

Republicans are in charge of congress now, as they were from October 1997 to July 2001, America’s last period of sustained low peacetime unemployment. In peacetime, unemployment hasn't been this low with Democrats running congress since one month in 1973, October, just before the Yom Kippur War. That conflict between Israel and Arab countries generated the first oil crisis, which damaged the U.S. economy and drove unemployment up the next month. To find any sustained period of low peacetime unemployment when Democrats controlled congress, one has to go back 48 years to October 1957, on the eve of the 1958 recession.

There is a reason to associate Republican congresses with low unemployment— taxes. Whatever they might do about the deficit, Republicans favor low taxes, which help businesses hire more workers. Economic studies of tax policies at the state level, and of nations outside the U.S., correlate low taxes and job creation, just as the European variety of high taxes drives up unemployment.

It’s new business activity that generates new jobs, and low taxes help business invest in the future.