What is good economic news in an election year?
Don’t ask an economist, because good and bad don’t allow for the opaque realities of national economics. Low interest rates are “good” for borrowers but “bad” for savers. Increased productivity is “good” for employers but “bad” for employees if not accompanied by wage increases.
Don’t ask a politician. Good economic news is whatever he or she can persuade you is good when you decide whether to hire or rehire. Often, that decision is based less on the economic data sculpted for you by the politician and more on your perception of economic trajectory. Direction counts for more than raw numbers.
Here’s one example: In January 1992, the unemployment rate under President Bush was 7.3 percent, a full percentage point lower than where it is for President Obama now. Bush could not speak of a “recovery,” because the jobless rate had been 6.9 percent the previous June. By June of his reelection year, the Bush unemployment rate was 7.8 percent, and presumptive Democratic nominee Bill Clinton called the Bush economy “the worst in 50 years.”
In November 1992, the jobless rate was back down to 7.4 percent and the recession two quarters gone (unemployment being a lagging indicator going into and coming out of a recession). Bush lost the perception war because he was on the wrong side of the trajectory curve. What’s more, when Bush the elder took office, the jobless rate was 5.4 percent. Even the “improved” jobless rate on Election Day 1992 was 2 percentage points higher than when his presidency began. In crucial ways, perception tracked reality. Reality, perception, and trajectory imprisoned Bush. That’s how his popular-vote total fell from 53.3 percent going in to 37.4 percent in ’92 (reflecting a defection of 9.1 million voters).
Obama and the presumptive Republican nominee, former Massachusetts Gov. Mitt Romney, have already begun to haggle over what is and what isn’t good news and whose policies can accelerate job growth.
The January jobs report showed the economy adding 243,000 net new jobs and a jobless rate of 8.3 percent. Obama flatly called it evidence of a recovery that would only lose steam if Congress (meaning Republicans in the House) stood in the way.
“Do not slow down the recovery that we are on,” Obama warned the GOP, referring to his demand for swift consideration of a 10-month extension of the current 2-percent payroll tax. “Don’t muck it up.”
For Team Romney, the solid spike in jobs created is cause for celebration—of the business cycle, not Obama’s economic stewardship. For Romney’s economic team, the January jobs report looked good in the same way a discarded dinette set spruces up a landfill.
The jobless rate—and its vital role as the perception-driving indicator of economic well-being—is far trickier to measure in this economy than most. That’s because job losses have been so deep and endured for so long.
This is the heart of the coming Obama-Romney clash over economic direction. The White House hails a steady decline in the jobless rate and a slow but steady rise in manufacturing employment (the number of factory workers rose to 11.9 million in January—the highest number since May 2009). But the Romney campaign sees that data in the context of Obama promises and the new American reality of chronic unemployment.
First, Obama’s promises. Back when the Democratically controlled Congress was debating Obama’s $824 billion stimulus bill, the White House projected those tax cuts and spending initiatives would keep the jobless rate below 8 percent—which didn’t happen. This has become a well-worn GOP talking point criticizing Obama’s performance. Less well-known is that the White House also projected the stimulus would have created a jobless rate of 6.4 percent today.
The other issue—and it cuts economically and psychologically—is that America’s jobs crisis is not just about those looking for work but those who have given up. Some 4.8 million Americans fall into that bleak category. The labor-force participation rate, a measurement of those with jobs and those looking for jobs, has fallen from 65.7 percent to 63.7 percent on Obama’s watch.
Two neutral factors contribute to this decline: the movement of first-wave baby boomers into retirement and a onetime downward adjustment the Labor Department made due to new census data. But the dominant reason is a stagnant job market. One way to look at job growth under Obama is to ask what the unemployment rate would be if the labor-force participation rate were the same as it was at the dawn of his presidency. The answer: 11 percent.
There’s another dimension to this debate. In addition to Romney having to contextualize Obama’s job record, he’ll need to persuade voters his economic policies and general embrace of George W. Bush’s tax cuts will make things demonstrably better. It’s worth noting that during the NBC/National Journal/Tampa Bay Times debate, not one Republican challenged a question that flatly stated the Bush tax cuts failed as a means of job creation or high-powered economic growth.
It’s a two-stage fight with Obama on the jobs issue. What is and what will be. Perception. Trajectory. Reality. He who rules, wins.
This article appears in the February 8, 2012, edition of NJ Daily.