Today the Labor Department announced that the unemployment rate has declined to 7.8 percent. It’s the first time the rate has fallen below 8 percent since President Obama was inaugurated in January 2009.
Unfortunately, the economy only created 114,000 new jobs last month, which is just about that number of new workers who enter the job market every month. Although the reported jobs creation number was small, the unemployment rate dropped sharply — from 8.1 percent to 7.8 percent — because the number of people who said they were employed rose by 873,000.
It being the middle of an election campaign, you’d expect the statistics to become a political football, and that’s exactly what has happened. President Obama says the report shows the economy is on the right track and we shouldn’t turn back. Mitt Romney says the economy isn’t producing enough jobs and that our current economy isn’t what a real recovery looks like.
I’m happy that the unemployment rate has fallen below 7.8 percent, but I’m more inclined to agree with Mitt Romney than the President on the import of the numbers. An economy that creates 114,000 jobs is basically treading water, and a 7.8 percent unemployment rate is unacceptably high and nothing to strut about. And, not being a government statistician or economist, it’s hard for me to reconcile the report that only 114,000 jobs were created with a surprising, 873,000-person increase in the ranks of the employed. Is the difference people who are working at home, or working part-time, or something else?
I can only go with what I am seeing here in central Ohio, and I’m not seeing signs of a budding recovery, significant hiring, or great optimism on the part of my fellow citizens. I hope I’m missing those signs — but until I see them I’m going to reserve judgment and see if we get more information about where those 873,000 newly employed people came from.
In addition, Romney also released a summary of his taxes going back to 1990. The summary reported that, during the period from 1990 to 2009, the Romneys paid taxes every year, with an average annual effective federal tax rate of 20.2 percent. Romney has now provided information about 23 years of tax returns, including releasing the tax returns themselves for 2010 and 2011.
The President’s speech reminded me of President Clinton’s speech the night before in that it was heavy on brief references to a host of issues and policy concerns. The President mentioned a number of matters — job training, renewable energy, investment in education, climate change, women’s health, oil and gas exploration, and countless others — and then moved on quickly. The speech included lots of round-number goals (“100,000 math and science teachers” or “a million new manufacturing jobs”) and future dates (“over the next decade”). It was as if the President wanted to touch every conceivable base. It certainly seemed that he did so, but talking, however briefly, about disparate issues makes it more difficult to knit together and present broad, unifying themes.
The President sought to address the charge that he views more government as the solution to every problem. Not all of our problems can be solved by government programs, he said — but our problems can be solved. Thereafter, however, every proposal and solution he offered seemed to involve some form of government program, benefit, or subsidy. He talked about “nation-building here at home” through construction of roads and bridges, which sounded like a pitch for another “stimulus” effort. It’s tough for President Obama to argue that he isn’t for bigger government, because he obviously believes that, as he says,”government has a role.” That belief makes it difficult to convince him that some government programs don’t work and that government spending often is wasteful. Last night, at least, there was no talk of eliminating any specific programs or spending as part of a plan to balance our budget.
The Administration predicted that the stimulus bill would move unemployment rate markedly lower; that didn’t happen. It said we would have “recovery summers” in 2010 and 2011; that didn’t happen either. Its forecasts of budget deficits, the costs of legislation like the Affordable Care Act, the losses likely to be incurred as a result of the GM bailout, and the success of “green energy” investments in companies like Solyndra also have been way off base. (We can argue about why the forecasts haven’t been realized, and how much of the blame should be allocated to the Bush Administration, “obstructionism” by House Republicans, or other factors. My point is simply that the Administration’s projections have consistently fallen far short of the ultimate reality.)
These figures are often revised, and perhaps this announcement will be modified in the future. And 1.5 percent growth is better than flat-lining, or actual economic contraction, but that’s about the extent of the positive things you can say about this news. Such economic growth is measly by any measure. It’s not enough expansion to create real employment opportunities for the new people entering the job market — good luck finding work if you are someone who graduated from college this year — and it basically means that the economy is in a stall. We’ll just have to hope that the stall ends with upward movement, and not a nose dive into new, double-dip recessionary territory.
Mitt Romney and other Republicans, ecstatic to be handed such a plum, jumped all over the statement, citing statistics like the unemployment rate and the number of home foreclosures to demonstrate that the economy is not doing fine and to portray the President as out of touch. By the end of the day, 
I’ll give the President the benefit of the doubt that he was using “fine” in a way that is consistent with our current economic reality; I don’t think it’s fair to seize on one word out of the thousands he speaks every day. I also think what he said immediately after saying that the private sector is doing “fine” is more significant, anyway. He went on to add: “Where we’re seeing weaknesses in our economy have to do with state and local government, oftentimes cuts initiated by, you know, governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don’t have the same flexibility as the federal government in dealing with fewer revenues coming in.”
Under the government’s approach to calculating the unemployment rate, those people just aren’t counted as unemployed any more. As a result of the continuing decline in the number of people looking for work, the share of Americans who are part of the labor force — either working or actively looking — has reached its lowest point in 30 years. Some of the people who have quit looking for work are early retiring Baby Boomers, but many are people who have just given up hope of finding a job.
Americans vote with their pocketbooks. For all the recent talk about Mitt Romney’s roof transportation of a family pet years ago, President Obama eating dog meat in the distant past, and other silly issues, the economy is what most ordinary people really care about. Contrived issues like prior treatment of dogs have no impact on everyday American life — but a shrinking economy, or a robust one, reaches every kitchen table in every home. We don’t need to be instructed by the media elites about the importance of the economy; we see it every day in unemployed or underemployed friends and struggling local businesses.
Barring unforeseen events, neither of those emotional themes will be at work in 2012. President Obama still has many supporters, but I don’t know anyone who views him as a kind of magical arbiter capable of bringing people together through sheer force of oratory and personality. His time in office has demonstrated, to all but the true believers, that the President is a politician who makes the same kinds of political calculations that other politicians do. The hopes for a miraculous national reconciliation and a perfect leader that motivated many people in 2008 just don’t seem to exist now.
What does this mean? First, I think fewer people will be deeply involved in the election and a smaller percentage of people will vote. No one will be arguing that the election offers a chance to vote for a perfect candidate. Second, I think many people have already made up their minds, based purely on their assessment of President Obama’s performance. They either think he has done a good job in avoiding another Great Depression despite the obstructionism of his opponents or believe he has spent recklessly and put the country on the path to financial ruin. Even the most powerful political ads aren’t going to change their competing perceptions.
There are some curious aspects to the report, and some negative news as well. For example, the BLS made an adjustment that simply eliminated 1.2 million from the workforce, which of course affected the statistics. In addition, the labor-force participation number fell to the lowest level since 1983. These statistics may indicate that some people have just given up after looking for work for years — which is a sobering thought. If true, that may mean that the unemployment rate will jump again if those people decide to once again start hunting for a job.
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I first noticed this after he was elected, when he sought to explain why he wouldn’t follow Republican economic advice. His simple point was: they’ve just driven the car into the ditch, and now they want the keys back. By the time he was done, however, the Republicans were sipping on Slurpees, the President and Democrats were mud-splattered and down in the ditch, and the illustration had become so weird and leaden you were rolling your eyes.
Odd to hear the President depict Americans as seasick passengers on a ship, isn’t it? And his simple point, that passengers won’t enjoy a ride through rough waters, even when the captain is doing the best job possible, also morphs into the whiny refrain that the President doesn’t control the economic “weather”– even though Presidents happily take credit when skies are sunny.
