by Rick McGahey, SCEPA Faculty Fellow
This morning's report on October employment confirms two things. First, the economy is stuck, teetering on the edge of an actual downturn. Second, Barack Obama's presidency is in serious trouble.
The employment report shows more stagnation in the U.S. economy. The unemployment rate moved marginally downwards from 9.1 to 9 percent. And payroll employment increased by a net of 80,000 jobs, the lowest increase in four months. Private employment rose by 104,000, but governments at all levels lost 24,000 jobs, as the federal stimulus winds down, and state and local governments continue laying people off in the face of their continuing fiscal crisis.
Average monthly job growth in the third quarter was only 96,000, well below the first quarter's monthly average of 166,000 additional jobs. Earlier this week, the Federal Reserve underscored the continued slowing of the economy, downgrading their economic and employment forecast for 2012, predicting a GDP growth rate of between 2.5 and 2.9 percent, which is 0.8 percent lower than their last forecast, issued in June. The Fed expects unemployment to drop very slowly, and not get down to 8 percent for another two years.
So as we enter a presidential election year, we will be looking at an economy with over 14 million unemployed people, with historic highs for the long-term unemployed. The economy is still struggling to even get the jobs numbers back to where they were when the Great Recession started. Keeping the unemployment rate constant will require generating 95,000 new jobs every month, while actually getting the rate down to 8.2 percent will require monthly job growth of 224,000, a number that no one expects to achieve. http://www.calculatedriskblog.com/2011/07/how-many-jobs-are-needed-over-next-year.html
This spells very bad news for President Obama. Incumbents have been re-elected in every presidential election since 1948, except for three times when two-year GDP growth averaged 1.9 percent, and the two-year average of the unemployment rate was 7.0 percent. Nate Silver at the New York Times has an article coming out in the Sunday magazine section where he presents forecasts for the 2012 election based on three variables: Obama's' approval ratings, economic performance, and the ideology of Obama's opponent.
The bad news is that the only winning scenarios Silver sees for Obama require economic growth; even an ideological opponent like Rick Perry is forecast to win if economic growth is stagnant, and if Mitt Romney is the opponent with stagnant growth, Silver puts Obama's odds of winning at less than 20 percent. The smarter Republicans know this, which is a major reason why they are blocking any job-creating measures in Congress.
Of course, no forecast is perfect, but the U.S. economy is a big ship that needs to be turning around fast. October's employment report, coupled with the Fed's downgraded forecast, doesn't show any signs of the ship turning, but instead shows continued drift.