President Obama’s economic recovery is caught in a tractor beam. He has long since abandoned major efforts to accelerate growth and job creation through government stimulus; now, there’s no way he could get them in time to dent the unemployment rate before November, even if he wanted to.
And so the president, in an election year where voters care first, second, third, and 100th about the economy, finds himself entirely captive to the malicious drag of global economic currents. Nearly 13 million unemployed Americans are trapped with him, along with 2 million more people who can’t work as much as they’d like – or have abandoned job-seeking entirely.
Today’s jobs report came loaded with disappointment. The economy created a net 69,000 jobs in May. The unemployment rate is ticking back up, to 8.2 percent. Construction, the surprise bright spot of the winter, has stumbled again, shedding 28,000 jobs last month.
Obama and Congress could have done more to boost growth before now. The slowdowns of the last two springs certainly suggested that course.
Obama has not given up, at least rhetorically, on hopes for stimulus before November. The chairman of his Council of Economic Advisers, Alan Krueger, stressed several Obama initiatives in a jobs-report release on Friday morning, including “proposals that would put teachers back in the classroom and cops on the beat, and put our nation’s construction workers back on the job rebuilding our nation’s infrastructure… eliminating tax incentives to ship jobs overseas, cutting red tape so responsible homeowners can refinance, giving small businesses that increase employment or wages a 10 percent income tax credit, investing in affordable clean energy, and helping returning veterans find work.”
No matter now. The job-creation sideshows of recent months in Washington – the Buffett Rule, Keystone XL, Bain Capital, Solyndra – are all-but irrelevant. The hopes for a quicker recovery, and Obama’s chances for re-election, rest with four dominant forces: Europe, housing, oil, and Ben Bernanke.
The middle two show the most promise. The beleaguered U.S. housing market appears to have reached bottom finally, and is bouncing upward in several large metro areas, including in the critical swing states of Florida, Colorado and Pennsylvania. Global oil prices are falling, and with them, slowly but surely, gasoline prices across America. The faster those trends pick up, the more consumption and investment will be unleashed in the U.S. economy, spurring job creation.
Europe remains a capital-p problem, not just for the euro zone, but for Asia, America, and global investors. There is little the United States can do right now to affect it, other than offer counsel and cheerleading from the sidelines. Still, it is stunning that neither Obama nor his Republican rival, Mitt Romney, spends much time on the campaign trail offering concrete ideas for how to insulate the U.S. economy from rolling fallout from the European crisis.
Bernanke is the wild card. He has often complained to Congress that fiscal policymakers haven’t held up their end of the bargain on spurring growth. He’s right. He also knows that’s not changing anytime soon. That makes the Federal Reserve the last, best hope for re-invigorating growth over the next few months. Another round of quantitative easing would not heal America’s growth wounds, but it would at least bring some relief. And charges from the right that the central bank was doing Obama's bidding.
Inflation remains low. Some 5.4 million Americans have been unemployed for 27 weeks or more. Every month of slow growth and disappointing jobs reports only risks locking those long-term unemployed into a permanent state of unemployability. If the Fed declines to act, Obama won’t be the only one feeling locked-in and powerless as the economy hurtles toward November.