Scrambling on job creation

November 12, 2009

The U.S. labor market is slowly healing. The declining number of monthly job losses and weekly initial unemployment claims show that. Yet President Obama still felt the need to announce a “jobs summit” at the White House next month.

That’s compelling evidence the White House doesn’t believe the job market is mending fast enough to keep unemployment from trending higher — or Democratic electoral prospects in 2010 from trending lower.

The summit is likely a table setter for Obama to announce Stimulus 2.0 (though he surely won’t use the word “stimulus”) at his State of the Union address in January. Indeed, Harry Reid is already cooking up a plan in the Senate.

All this represents a sharp departure in message from the White House, which has previously counseled patience. Let the $787 billion American Recovery and Reinvestment Act work, Team Obama kept saying. Even as the unemployment rate blew past 8 percent — a level of joblessness that the stimulus was supposed to prevent — the White House stuck to its guns and dismissed the need for significant new job creation efforts.

On the political side, there were fears that a new package would be tantamount to admitting Stimulus 1.0 was a failure and that it would distract from healthcare reform. On the economic side, many advisers wanted Obama to pivot toward deficit reduction as soon as possible and not spend more on stimulus.

Indeed, the summit news came as the idea was floated that the administration might use unspent TARP funds for deficit reduction. (Did you notice that, bond vigilantes?) Obama may also use the January address to announce a commission to deal with the long-term fiscal deficit.

But economic anxiety and impatience proved lethal for Democrats in the New Jersey and Virginia gubernatorial races, and may cost the party again in the 2010 midterms. That and the surge to double-digit unemployment changed the White House calculus.

The new emphasis on jobs might be too late. Indeed, new is the appropriate word since the first package was not geared toward creating jobs so much as increasing economic output, as Lawrence Summers recently clarified. Temporary income tax cuts and credits, for instance, have a poor record of generating jobs.

But better for White House officials to take the initiative and adjust their 2010 agenda now than have Speaker John Boehner do it for them in 2011.

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