It feels like forever since we’ve had a budding trend in the job market worth celebrating, as opposed to just cheering quietly with fingers crossed. Now we have one, and it came sooner than most forecasters expected, and suddenly analysts are talking about turned corners and brightening reelection prospects for President Obama. As investment banker and commentator Daniel Alpert tweeted on Friday, “Mimosas for breakfast at 1600 Pennsylvania Avenue this morning.”
White House officials steered away from that level of public touchdown-dancing, and with good reason. The news from the Labor Department that the economy added 243,000 jobs in January, and that the unemployment rate dipped to 8.3 percent, is the best evidence yet that the United States is finally back on track to sustained growth. Economists roundly agree that in the details of the report, everything looks good--there are no caveats lurking to temper your joy. But Washington officials could slow it all down again if they stop adding fuel to the recovery.
In economics, it helps to focus on long-run trends while everyone else is distracted by the latest data. The trend over the last year is of unsteady improvement, highlighted by a net gain of nearly 2 million jobs. Policymakers helped speed that growth. Congress and President Obama boosted consumer spending by keeping taxes low, extending the Bush tax cuts, and adding a temporary payroll-tax reduction that took effect last year. The Federal Reserve has kept monetary policy accommodative, most recently signaling its plans to keep interest rates near zero through 2014.
Mess with either of those areas right now--by failing to extend the about-to-expire payroll-tax cut through year-end, or by taking even a first step toward tighter monetary policy--and you risk pulling the emergency brake on the recovery just when it’s set to reach highway speed.
The underlying gauges of the nation’s economic health right now are good, not great. Manufacturing and service-sector activity is rising. New unemployment claims are falling. The housing market remains a mess, with falling prices and a foreclosure glut dragging on growth more than any other factor. The public sector is shedding jobs, as governments at all levels tighten budgets. Nearly 13 million Americans want to work but can’t find jobs.
In other words, the economy is still vulnerable to an external shock, such as an oil-price spike or a financial blowup in Europe, or to a major policy misstep from Washington.
As Ted Ellis, the mayor of Bluffton, Ind., and president of the National League of Cities, said in a press release on Friday: “Until the millions of unemployed and underemployed are back to work, our families are no longer struggling to make ends meet, and our small businesses are acting as the economic engines of the economy, we cannot rest.”
Ellis was talking to Washington. Democratic and Republican leaders echoed his concern--rhetorically, anyway. House Speaker John Boehner, R-Ohio, said in a release, “We can’t be satisfied with an unemployment rate mired above 8 percent for years on end; we must do better.” Obama’s top economist, Alan Krueger, wrote, “It is critical that we continue the economic policies that are helping us to dig our way out of the deep hole” from the Great Recession.
Both sides can show they’re serious by working together, without delay, to keep the recovery chugging ahead. Now that would be something to celebrate.