James Pethokoukis

Politics and policy from inside Washington

5 political impacts of today’s July jobs report

August 7, 2009

Rising U.S. unemployment, to borrow a phrase, has been a giant vampire squid wrapped around the face of the Obama administration, sucking out its popularity and thus draining momentum from its legislative agenda. But now the White House received some good news from the jobs front. The unemployment in July unexpectedly fell to 9.4 percent from 9.5 percent in June. This breaks a string of 16-straight months where the unemployment rate had either risen or stayed flat, including every month of the Obama term. (Recall the rate was 7.6 percent in January.)

Now, the economy still lost a quarter of a million jobs. And had the same number of people been looking for work in July as June, the rate would have risen. Plus, the broader unemployment rate is still over 16 percent. But the news headlines will show the traditional jobless rate easing, making the approach toward double digits a bit slower if also more unlikely. Here are the political impacts of a possible economic turning point:

1) A third positive data point for Obamanomics. The stock market has been up sharply, the decline in GDP has slowed sharply and now Team Obama can point to a dip in the jobless rate. (Plus cash for clunkers seems pretty popular.) When the market was down, GDP collapsing and the unemployment rate soaring, it was tough for the White House to counter GOP claims that its stimulus plan was anything but a miserable failure. Now Republicans have to make a tougher argument, that a) a “real” recovery plan would be working faster rather than this sugar high from government spending, and b) it’s really the natural strength of the economy (with some help from monetary policy) taking over rather than anything the Democrats have done. More of a muddle than “Obamanomics has done nothing!”

2) Makes the economy a bit less of a negative for healthcare and climate change legislation. The bad economy — and rising unemployment in particular — hurt the Obamacrat agenda in several ways. First, with the economy worsening, it meant Obama had yet to fix the economy. And that was the main thing he was elected to do. Until that is done, healthcare and climate change look like distractions from Job One. Second, a weak economy made it seem to voters like it wasn’t a good time to pass legislation that would add taxes and costs to the economy. Third, the bad economy made Obama less popular and thus his agenda less popular. To the extent that Obama looks like he is capably managing an actual recovery, it will also help momentum on these other issues. And certainly Democrats don’t want to see unemployment hit 10 percent right when healthcare crunch-time hits in the autumn.

3) There is a risk Obama and the Democrats overplay their hand.
Look, the unemployment rate is still double what Americans have become used to during the past generation. Plus, the broader unemployment rate is at scary levels, particularly in states like Michigan and California. And this dip could be followed by a reversal. After the 1990-91 recession ended, the unemployment rate took a similar dip, from 6.8 percent to 6.7 percent. But then it started rising again for the next year and half, eventually hitting 7.8 percent. This was due to a combination of slow economic growth and discouraged workers looking for jobs again (which meant the Labor Department started tracking them again). A lengthy jobless recovery may well be in the offing. Dems would be wise to avoid premature celebration. Here is how IHS Global Insight puts it: “The unemployment rate fell, but it is hard to believe that it has peaked already. … We will need to see sustained employment gains before concluding that unemployment has peaked, and that probably won’t be until the first half of 2010 with unemployment above 10 percent.” This is why the White House is taking a cautious stance today.

4) Voter anxieties are likely to remain high even if the worst is over. President Bush, the first one, lost the 1992 presidential election to Bill Clinton because of the economy and the lingering impact of the 1990-91 recession. Two years later, though, it was the Democrats’ turn to feel the brunt of widespread economic anxiety as the Republicans captured both the House and the Senate. Even though the economy had been growing for 14 straight quarters by then and the unemployment rate was down to 5.8 percent from a high of 7.8 percent in 1992, 72 percent of Americans still thought the economy was only “fair” or “poor,” and 66 percent thought the nation was headed in the wrong direction. That’s right—3½ years after the 1990-91 recession ended, the economy was still weighing negatively on voters. Lesson: It takes a long time after a bad downturn for people to feel safe and confident.

5) The GOP argument just got tougher. The Republicans would be crazy to pull back from attacking Obama’s management of the economy, given high joblessness and massive deficits. But they need to prepare themselves for two things. First, there could be a big GDP pop in the near future. The typical first quarter after a recession shows 5 percent GDP growth or better. And if employers overestimated the severity of the downturn and cut too many jobs, the same upside surprise could happen with employment. At that point, it will seem like Obamanomics might be working, and GOPers better have an answer. Still, if we get a Reagan style “v-shape” recovery and boom, Republicans are in deep trouble, though concerns about the deficit may give a bit of cover. More likely: a good quarter or two followed by weak growth and continued high unemployment. The Long Recession Scenario, or 1990s Japan-lite. Why? Still lots of economic uncertainty after financial meltdown, impact of huge deficits on interest rates, weak consumers, a dead housing market, and the high-tax, high-regulation Obama agenda among others.

Bottom line: The unemployment report provides a short-term boost to Obama’s popularity and agenda, but does not change the likely scenario that on Election Day 2010 (maybe even 2012), voters will not be thrilled about the economy. And to the extent the economy improves, will voters view it as a real turnaround or one manufactured by unsustainable government spending, as with cash for clunkers? A foundation of rock or sand?

Comments

After the last recession, I told my peers that the so-called recovery was balancing on toothpicks. There were no changes to how Americans moved forward and reliance on consumer spending only seems to have exacerbated the current plunder of the current recession.

We all know the housing debockle started the economic decline, and it was outrageous that Greenspan said he could not foresee it coming – I and my peers certainly did, although at the time, we didn’t see it having the level of devastation that it has had.

I look at this anticipated recovery a little like losing weight – if we recover in a slower and more methodical manner, making meaningful changes and as a nation coming together to rebuild our economic system, then maybe the severity of the next recession (which you can bet there will be another recession), won’t be as catastrophic.

What I haven’t seen are measures to ensure against some of the past mistakes from occurring again. Why hasn’t there been an overhaul of the SEC? Why hasn’t there been any information about changes and replacing those in charge who were responsible for people like Madoff to exist? Why is the current administration not requiring the banks to start lending again. Why is private industry not being allowed to borrow – but instead are barely hanging on? Why aren’t consumers with good credit allowed to refinance their homes to more competitive rates if their balances exceed Fannie Mae limits? I think there are a lot of crucial areas for improvement that the Press is not addressing on a daily basis as much as they should.

Posted by mbh | Report as abusive
 

As I read the numbers behind the employment rate, no one seems to be reporting that the rate is based on 422,000 deleted from the labor force from June. Could it be just a coincidence that the numbers would be “boost” to the President just when he needs it for healthcare, etc.?

And the timing of the positive surprise in GDP “advance estimates” to be revised Aug. 27 along with the upward revisions of what was inherited.
Please do some real reporting on how government departments of Commerce and Labor could just possibly make positive moves that surprised outside experts.

Posted by Linda Davis | Report as abusive
 

can’t wait to see how they “limbo-dance” under the the deficit revisions…the one that was due in July.

the same one that will have to be revised from a predicted 8% unemployment as their working number for tax revenue.

 

THE COMING MASSIVE TAX HIKE ON THE MIDDLE CLASS

To initiate an advance on the lengthy economic turnaround, the joy ride of debt-spending-with-wanton-abandon mindset enjoyed by Bush and continued by Obama must be brought to a close.

Here come the real tax increases on Everybody.

http://pacificgatepost.blogspot.com/2009  /08/obama-middle-class-income-tax-incre ases.html

 

Folks are twisting themselves into pretzels trying to avoid the “good news.” I remember this from Clinton’s days when everyone predicted tremendous doom and gloom. Sorry people, but we will be profitable and successful in the future. That’s what this country does under Democrats. Enjoy it!!!

Posted by John K | Report as abusive
 

“debt-spending-with-wanton-abandon mindset enjoyed by Bush and continued by Obama”

kinda like saying charlie manson and pol pot were both murderers. It doesn’t provide the moral superiority that is truly ‘befitting’ one, over the other.

last projection I heard, was that obama would need 10 trillion of debt to cover his spending. Bush was like dying of cancer, while obama is just a blunt object to the head.

Posted by mark l. | Report as abusive
 

We have the 37th worst quality of healthcare in the developed world. Conservative estimates are that over 120,000 of you dies each year in America from treatable illness that people in other developed countries don’t die from. Rich, middle class, and poor a like. Insured and uninsured. Men, women, children, and babies. This is what being 37th in quality of healthcare means.

I know that many of you are angry and frustrated that REPUBLICANS! In congress are dragging their feet and trying to block TRUE healthcare reform. What republicans want is just a taxpayer bailout of the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT health insurance industry, and the DISGRACEFUL GREED DRIVEN PRIVATE FOR PROFIT healthcare industry. A trillion dollar taxpayer funded private health insurance bailout is all you really get without a robust government-run public option available on day one. Co-OP’s ARE NOT A SUBSTITUTE FOR A GOVERNMENT-RUN PUBLIC OPTION. They are a fraud being pushed by the GREED DRIVEN PRIVATE FOR PROFIT health insurance industry that is KILLING YOU!

YOU CANT HAVE AN INSURANCE MANDATE WITHOUT A ROBUST PUBLIC OPTION. MANDATING PRIVATE FOR PROFIT HEALTH INSURANCE AS YOUR ONLY CHOICE WOULD BE A DISASTER AND UNETHICAL, CORRUPT, AND MORALLY REPUGNANT. AND PROBABLY UNCONSTITUTIONAL AS WELL.

These industries have been slaughtering you and your loved ones like cattle for decades for profit. Including members of congress and their families. These REPUBLICANS are FOOLS!

Republicans and their traitorous allies have been trying to make it look like it’s President Obama’s fault for the delays, and foot dragging. But I think you all know better than that. President Obama inherited one of the worst government catastrophes in American history from these REPUBLICANS! And President Obama has done a brilliant job of turning things around, and working his heart out for all of us.

But Republicans think you are just a bunch of stupid, idiot, cash cows with short memories. Just like they did under the Bush administration when they helped Bush and Cheney rape America and the rest of the World.

But you don’t have to put up with that. And this is what you can do. The Republicans below will be up for reelection on November 2, 2010. Just a little over 13 months from now. And many of you will be able to vote early. So pick some names and tell their voters that their representatives (by name) are obstructing TRUE healthcare reform. And are sellouts to the insurance and medical lobbyist.

Ask them to contact their representatives and tell them that they are going to work to throw them out of office on November 2, 2010, if not before by impeachment, or recall elections. Doing this will give you something more to do to make things better in America. And it will make you feel better too.

There are many resources on the internet that can help you find people to call and contact. For example, many social networking sites can be searched by state, city, or University. Be inventive and creative. I can think of many ways to do this. But be nice. These are your neighbors. And most will want to help.

I know there are a few democrats that have been trying to obstruct TRUE healthcare reform too. But the main problem is the Bush Republicans. Removing them is the best thing tactically to do. On the other hand. If you can easily replace a democrat obstructionist with a supportive democrat, DO IT!

You have been AMAZING!!! my people. Don’t loose heart. You knew it wasn’t going to be easy saving the World. :-)

God Bless You

jacksmith — Working Class

I REST MY CASE (http://krugman.blogs.nytimes.com/2009/0 7/25/why-markets-cant-cure-healthcare/)

Republican Senators up for re-election in 2010.

* Richard Shelby of Alabama
* Lisa Murkowski of Alaska
* John McCain of Arizona
* Mel Martinez of Florida
* Johnny Isakson of Georgia
* Mike Crapo of Idaho
* Chuck Grassley of Iowa
* Sam Brownback of Kansas
* Jim Bunning of Kentucky
* David Vitter of Louisiana
* Kit Bond of Missouri
* Judd Gregg of New Hampshire
* Richard Burr of North Carolina
* George Voinovich of Ohio
* Tom Coburn of Oklahoma
* Jim DeMint of South Carolina
* John Thune of South Dakota
* Kay Bailey Hutchison of Texas
* Bob Bennett of Utah

Posted by jacksmith | Report as abusive
 

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