At the end of the 2000 film “The Perfect Storm”, a Gloucester swordfish boat captain (played by George Clooney) finally accepts that his crew won’t escape a monster hurricane in the North Atlantic. “She’s not gonna let us out,” he says as the trapped vessel moves from the eye of the storm and back into the raging winds.
The White House economic team can probably relate. The nation’s unemployment rate jumped to 9.7 percent in August, said the Labor Department, after dipping to 9.4 percent in July. “That drop in July had been too good to be true,” sighed Nigel Gault, the chief U.S. economist at IHS Global Insight. Merely the eye of the storm, perhaps.
To be sure, the pace of monthly job losses is abating, falling to 216,000 compared with a high of 741,000 in January. It now also seems unlikely that the unemployment rate will hit a post-World War II high of 10.8 percent. Good news all. But the employment declines do continue nonetheless, with more than 7 million jobs lost since the recession began in December 2007
Also continuing to decline is President Obama’s approval rating, which has plunged to 53 percent from 61 percent during the past three months, according to an average of polls calculated by RealClearPolitics. Almost nothing poisons a president’s popularity like high unemployment.
And why think that the job market or the president’s approval rating will improve dramatically during the next year or so? Let’s assume a snappy recovery in 2010 with GDP growth of 3.5 to 4 percent. That’s the JPMorgan forecast. But despite a mild V-shaped recovery, the firm’s economists still see an average unemployment rate of 9.4 percent in the fourth quarter of that year.
Even the superbulls at First Trust Advisors, looking for 4.5 percent GDP growth in 2010, don’t see unemployment breaking much below 8.5 percent. Keep in mind that those rates are almost double what Americans have come to expect the past two decades. It’s going to seem like a jobless recovery to many voters.
The labor market isn’t going to let Team Obama out. Its troubles will continue to drain the president’s popularity and perhaps result in large losses for congressional Democrats in the 2010 midterms. If Obama still wants to pass big change from a position of moderate bargaining strength — and while he still has maximum muscle on Capitol Hill — it needs to be now. This would mean centrist proposals like healthcare reform that would expand coverage while also making it easier for individuals to purchase their own private insurance, or a climate change bill where revenue from carbon emission allowance auctions would offset payroll taxes rather than given away to companies or spent by government.
Rahm Emanuel, White House chief staff, famously said that you “never want a serious crisis to go to waste.” With the moment of acute economic crisis past and a long “muddling through” begun, the president’s time of opportunity is nearing an end.