Friday’s job report, which showed that 165,000 jobs were created in April and the unemployment rate dropped to 7.5 percent, was greeted by many news outlets as wonderful news. It’s not clear to me why.
I’ll happily concede that the jobs report indicates that the economy is not in immediate danger of lurching into another recession. And it’s true that the stock market is doing very well, with the Dow having crossed 15,000 for the first time.
The Dow Jones Industrial Average hit 15,000 this morning, the first time it has crossed that benchmark. Even if it backs off and closes below that level, this is a remarkable recovery from its Great Recession low in March 2009, when it hit 6,626. In the last four years the Dow has risen 123 percent.
How do we square such a bull market with the anemic recovery I noted earlier today and the long period of sub-par growth that Pete Wehner referred to? To be sure, the stock market is a leading indicator, recovering sooner than the economy as a whole, whereas unemployment is a lagging indicator. But it takes more than that to explain things.
According to the jobs report released this morning, the recovery continues to dawdle along, confirming its status as the worst recovery since the Great Depression.
There were 165,000 jobs created last month, and the unemployment rate dropped another tenth of a percent, to 7.5 percent. That’s down four-tenths of a percent since January. But, again, much of the drop in unemployment has not come about through job growth but through workers dropping out of the labor force. The participation rate, the percentage of the population holding jobs, remained unchanged over last month, at 63.3 percent, but that’s down from 63.6 percent in January. It has been dropping steadily throughout the so-called recovery.
I certainly agree with Seth Mandel that the federal budget can never be brought under control without entitlement reform. Entitlements are well over half the budget. And the dates when each program will reach insolvency are all known. Those dates are not that far away, some less than 10 years.
He says there are only two ways to get to a balanced budget. One is a balanced budget amendment to the Constitution that would force the government to spend within its means and the other is for the president and Congress to man up and just live within the government’s means, however inconvenient that will be politically.
In the aftermath of President Obama’s now-obvious-to-all sequester overreach–in which he first predicted the end of the world as we know it, then backed away from those claims once the cuts went into effect, then attempted to inflict maximum pain on the American people, and is now blaming the Secret Service for the stupid and unnecessary decision to shut down White House tours–something is changing.
President Obama’s RealClearPolitics.com approval rating is in the 40s. His disapproval rating exceeds his approval rating in three different polls (Fox, McClatchy/Marist, and Quinnipiac). Congressional Democrats are beginning to grouse. And according to a Washington Post story yesterday, Mr. Obama’s approval rating at this early stage in his second term is among the lowest of any president in the post-World War II era.
It hasn’t been a good week in economic news. Earlier this week we learned that the GDP contracted. John Steele Gordon wrote at the time: “The GDP shrank in the last quarter of 2012, declining a small 0.1 percent. While that is minimal, it is the first negative quarter since the second quarter of 2009 and a sharp slowdown from the 3.1 percent growth in the third quarter.” Today he wrote about the disappointing jobs numbers, which showed low growth and a slightly higher unemployment rate.
It’s interesting that this week, in light of all of this economic doom and gloom, that the Obama administration has decided to layoff its long-defunct Jobs Council, which was set to expire this week. Don’t worry about these layoffs, however, as the Council was composed of business and labor leaders–they all have day jobs to fall back on. The Council hasn’t met for over a year and served more as a photo opportunity than an actual working group–while photos were quick to emerge from the meetings, recommendations, reports and accomplishments never quite made it out. One member of the Council, Intel’s CEO Paul Otellini, didn’t exactly have much confidence in the president last year, as he publicly endorsed his Republican opponent Mitt Romney.
Well, another month, another mediocre jobs report. The economy added 157,000 jobs in January while the unemployment rate ticked up a notch to 7.9 percent.
Those who have been unemployed long-term remained at a dismal 4.8 million and were 38.1 percent of all unemployed. There were 8 million people working part-time who would rather be working full-time. That number might well go up in the future as companies adjust their workforces to avoid Obamacare mandates requiring health insurance (or a fine) if there are more than 50 full-time employees.
Democrats spent the 2012 presidential campaign successfully blaming George W. Bush for the country’s sluggish economy. But a week after President Obama’s second inaugural, they are still not taking responsibility for the country’s fiscal health. The White House responded to yesterday’s disturbing news that GDP declined for the first time since 2009 in predictable fashion: they blamed the bad numbers on Republicans. White House spokesman Jay Carney said the dip was the fault of “Congressional Republicans” who have tried to restrain the government’s out-of-control spending. Even though the president got his way in the fiscal cliff negotiations with the GOP, Carney said the threat of sequestration, which would mandate across-the-board spending cuts, is the real culprit for the downturn and that the “brinksmanship” by the House Republicans was victimizing the nation’s economy.
This was thin gruel even from a practiced spin master like Carney. The idea of sequestration, which will have a particularly devastating effect on defense, originated in the White House and not the GOP caucus before it was put into the 2011 deal on the debt ceiling. But while we must give Carney credit for his usual chutzpah, the idea that Republican efforts to face up to chronic fiscal problems via entitlement reforms is to blame is a particularly depressing example of the ideological dead end into which the administration has driven the economy. As John Steele Gordon wrote yesterday, there is no way of knowing yet whether yesterday’s GDP numbers are the harbinger of an Obama recession or merely a statistical anomaly, but the steadfast refusal of the White House to face up to the long-term threats is what could be driving the economy into the ditch.
The GDP shrank in the last quarter of 2012, declining a small 0.1 percent. While that is minimal, it is the first negative quarter since the second quarter of 2009 and a sharp slowdown from the 3.1 percent growth in the third quarter. Government spending was down sharply, while businesses cut inventories. Foreign trade was down 5.7 percent. But consumer spending was up 2.2 percent, an increase from the previous quarter. And housing continued its slow recovery.
So what’s going on? Good question. It could just be a blip or it could be the start of a new recession. (The usual definition of a recession is two consecutive quarters of declining GDP, or what economists, with their usual talent for assaulting the English language, call “negative growth.”)
The unemployment rate fell to 7.7 percent from 7.9 in October, and 146,000 jobs were added to the economy. But the first number is from the Household Survey data and the second from the Establishment Survey data. As usual in this economy, the two surveys tell different stories.
According to the Household Survey, the number of unemployed remained about the same, at 12 million, and long-term unemployed made up 40.1 percent of total unemployed, both dismal numbers. Equally dismal was the number of underemployed, working part-time jobs but wanting full-time work, at 8.2 million.
As John Steele Gordon noted, the unemployment rate ticked up slightly last month, but it’s still just below 8 percent — a psychological barrier that would have certainly hurt Obama days before the election. Still, it’s important to remember where we were supposed to be at this point, at least according to the Obama administration’s 2009 estimates that were used to sell the stimulus package to the public. Jim Pethokoukis writes:
Back in early 2009, White House economists Christina Romer and Jared Bernstein predicted the unemployment rate would be 5.2% in October 2012 if Congress passed the $800 billion stimulus. As the above chart shows, they weren’t even close.
The last jobs report before the election came in at 8:30 this morning. It showed a net gain of 171,000 jobs and an uptick in the unemployment rate to 7.9 percent from 7.8 last month.
These numbers are unlikely to impact the election significantly. The job growth is still not big enough to bring down the unemployment rate, at least not quickly, but it remains job growth. President Obama can claim progress. The unemployment rate did not go back above 8 percent, as some thought might happen after last month’s unexpected .3 percent drop. But it did rise a little. That’s not good news for the president.
The Commerce Department this morning gave a reading on the third-quarter 2012 Gross Domestic Product—the sum of goods and services produced in the United States. GDP climbed 2 percent (on an annualized basis) in July, August, and September, slightly above the predictions of economists. This was an improvement on the dismal 1.3 percent growth the economy saw in the second quarter, but still a long way from the sort of robust recovery that is needed to significantly bring down the unemployment rate and restore a sense of prosperity to the country.
Much of the growth was in consumer spending, especially for durable goods (such as automobiles, refrigerators, etc.), which saw growth at 8.5 percent. But business investment remained weak, with fixed investments (buildings and equipment, for instance) actually declining 1.3 percent after climbing 3.6 percent in the second quarter. This might reflect caution ahead of the election and fear that the “fiscal cliff” of tax hikes and government spending cuts due January 1 might actually come to pass. Most economists think that that would send the economy right back into full-blown recession.
The post-debate polls taken last night seemed to more or less line up with the conventional wisdom forming on social media: President Obama won a narrow victory over Mitt Romney, helped late by escaping the Libya question—thought to be his Achilles’ heel—when Romney dropped the ball.
But that Libya exchange—in which moderator Candy Crowley intervened on Obama’s behalf and only afterwards seemed to realize that she had been wrong on the facts—also revealed the flip side of Romney’s lack of focus on Benghazi: his fluency and preparation for questions on the economy, and Romney’s continuing bet that the economy will overshadow the other issues in voters’ minds. Polls back this up, and the post-debate polls seemed to as well. While both the CNN and CBS polls gave Obama a hard-fought win on points, respondents to both polls gave Romney the win on the economy by wide margins. CBS reports:
It is telling that our expectations are so low these days that the latest dismal jobs report issued by the U.S. Labor Department is being viewed with some relief. It noted that the economy had added 114,000 jobs in September. That is, we are told, not so bad because that is around the figure most economists projected, even though it is below the total that is generally considered the number needed to account for normal population growth. The drop in the unemployment rate to the lowest point in the Obama presidency should not deceive us, because it is clear that many people have simply given up looking for work during what is the worst economic recovery since the Great Depression. Though President Obama may choose to highlight the 24th straight month with job growth since the end of the recession he inherited from his predecessor, with 12.1 million Americans still unemployed, a drop in the number of manufacturing jobs and temporary employment, we may be closer to the next Great Recession than to genuine recovery.
This is hardly the sort of situation that would normally bode well for the re-election of any incumbent president. Yet since President Obama’s poll numbers went up rather than down after an even worse report last month, it would be foolish to assume these discoursing numbers will hurt him. Earlier this week, I referred to Obama as the real Teflon president, since neither the recent revelation about his past use of racial incitement nor the security screw up in Libya (and the subsequent lies about it from the White House) or even a bad economy seemed to be enough to dent his standing in the polls. Yet all it takes to burst a balloon is one sharp jab. After the president’s awful performance in the debate with Mitt Romney on Wednesday, it could be that Americans will start to view the president’s litany of disasters with less equanimity than before.
The number of jobs increased an anemic 114,000 (with the numbers for both July and August revised upwards). The labor force participation rate barely ticked up, from 63.5 percent to 63.6. That’s still a dismal number. Long-term unemployment (over 27 weeks) edged up to 40.1 percent of the unemployed.
This year has seen an average job growth of 143,000 per month. In 2011 it was 153,000. But the number that will be in the headlines is 7.8 percent.
As John Steele Gordon rightly points out, Ben Bernanke’s latest attempt to bail out a failing economy by manipulating interest rates isn’t likely to be met with any more success than his first two tries. Some Democrats may think the Federal Reserve’s decision to print more money will inflate the economy enough to get President Obama re-elected. The assumption is that it will cause a rise in the stock market that will be interpreted as a sign that the recovery has finally succeeded. However, the result of another dose of inflationary economics, compounded by growing debt, unemployment and less than 2 percent growth may be another recession that will come on the heels of the current anemic recovery.
The constant refrain coming from the administration and its defenders has been that a change of course away from the president’s reliance on trying to spend our way out of the economic ditch would be a return to the failed Republican policies of the past that created the problem in the first place. But as James Pethokoukis writes at the American Enterprise Institute blog, it is cheap money and too much debt that caused the so-called Great Recession that the president inherits. That recession ended in the summer of 2009. It was followed by a recovery for which the president once took credit. But the feeble nature of that revival is something he still blames on his predecessor. Thanks to the continuation of the spending and debt binge that took place over the last four years, the country may soon be faced with another Great Recession no matter who wins in November. But it is not likely that most Americans will be willing to blame that one on George W. Bush.
The White House spins today’s grim August jobs report (which John Steele Gordon details below), calling it “further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression”:
While there is more work that remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression. It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007. To create more jobs in particularly hard-hit sectors, President Obama continues to support the elements of the American Jobs Act that have not yet passed, including further investment in infrastructure to rebuild our Nation’s ports, roads and highways, and assistance to State and local governments to prevent layoffs and to enable them to rehire hundreds of thousands of teachers and first responders. To build on the progress of the last few years, President Obama has also proposed an extension of middle class tax cuts that would prevent the typical middle class family from facing a $2,200 tax increase next year.
The official unemployment rate fell two-tenths of a percentage point in August to 8.1 percent. That’s the good news. The rest isn’t so great.
Only a net of 96,000 jobs were created in August, way below what is needed to bring down the unemployment rate long term. And the numbers for both June and July were revised downwards. (June was down from 64,000 jobs created to 45,000, July from 163,000 to 141,000). The percentage of the population in the labor force continued to decline (to a dismal 58.3 percent), 5 million people have been unemployed for more than 27 weeks, 40 percent of the total unemployed. Involuntary part-time workers remains at 8 million.
All in all, the sluggish recovery continues sluggishly at best. These numbers cannot make the Obama campaign very happy the morning after the candidate’s big night in Charlotte. They powerfully reinforce the idea that Obama just hasn’t gotten the job done in the last three and a half years and that perhaps Clint Eastwood is right: if a public servant isn’t performing you have to let him go.
ABC’s Jake Tapper has been trying his best to get the White House to comment on the issues the public cares about — namely, the economy — but it’s been an uphill battle so far. At the WH press briefing today, Tapper pressed Jay Carney on why Obama hasn’t mentioned yesterday’s troubling CBO report:
ABC’s Jake Tapper: “The Congressional Budget Office report is a pretty dire warning about what this nation faces, yet I didn’t hear the president mention it yesterday, is there a reason why?”
White House Spokesman Jay Carney: “Well I think I put out a statement which is the White House’s view and the president’s view. The president talks every day that he’s out there, as he was yesterday, about what we need to do to help build our economy, help it to continue to grow, help it to continue to create jobs and yesterday, and the day before, he was focusing on the need to continue investments in education because he firmly believes that education is a matter of our economy, it’s an economic issue.”
Tapper: That’s not what the Congressional Budget Office was addressing, they were talking about … The president talked about education, he talked about Todd Akin, he talked about Michael Jordan, he talked about a lot of—
Carney dodged it, responding with a few boilerplate sentences on Obama’s “balanced approach” to the “fiscal challenges.” But it’s a question that should be put to the White House over and over again. Why won’t the Obama campaign talk about the economy? More importantly, why does the White House press corps — Tapper and some others excluded — allow Obama to get away with it?