Thursday, November 10, 2011

Job numbers no boost for Obama's re-election

Business Times - 11 Nov 2011

Job numbers no boost for Obama's re-election

US October jobless data brought cheer, but may not be good enough to meet job targets


IS THE American economy showing some indications that it is experiencing a slow but steady recovery? The US jobs report issued by the Labor Department last week suggested that that may be the case. Eighty thousand American jobs were added in October - spread out in health care, hotels and restaurants and other temporary work - which helped to bring down the unemployment rate from 9.1 per cent to 9 per cent, the first decline since July and the lowest unemployment rate since April.

The net gain of 80,000 jobs in October was about 20,000 fewer than had been projected, but revised estimates from August and September showed the economy created 102,000 more jobs than initially thought (suggesting that we could see upward revisions to the October numbers). And heading into positive territory was the number of long-term unemployed - those out of work for 27 weeks or longer - which fell to 5.9 million.

That job creation turned to be even better than expected and the unemployment rates ticked down a little suggested that the US economy was not facing any risk of a double-dip recession right now. At the same time, one should not jump to the other conclusion that could be derived from the unemployment numbers - that the jobless recovery may be coming to an end.

When the previous jobless recovery was over in October 2004, the US economy started creating 250,000 to 300,000 new jobs a month for the next couple of years. But that is not going to happen anytime soon. In fact, many of the jobs that were created after 2004 would not ever come back, according to Keith Hall, a Labor Department economist.

'To keep up with just the population growth, you probably need - my estimate is around 130,000 jobs,' Mr Hall told a Congressional committee last week. 'So, at 80,000, you're not quite even keeping up with population,' he concluded, adding: 'So, in fact, over a long time, you might even see the unemployment edge back up.'

Also arguing that the unemployment cup was half-empty was the Federal Reserve, warning that unemployment was not expected to fall much through the end of next year and will be hovering around 8.5 to 8.7 per cent next year.

And that explains why President Barack Obama - whose advisers had projected that their policies would help bring the unemployment rate to about 6 per cent next year - will be facing an uphill political battle as he tries to win re-election next year.

Interestingly enough, two of the demographic groups that seem to be particularly vulnerable in the current economy and who have problems getting, or holding, a job are workers who are nearing retirement and younger workers who are getting out of college.

They constitute two electoral blocs - the middle-aged and the young voters - whose support Mr Obama needs next November, if he wants to win the presidential race.

Moreover, there are disturbing signs on the job front that are probably driving a sense of despair among voters who believe that their country was headed in the wrong direction, according to results of recent opinion polls.

A study conducted by the independent Pew Fiscal Analysis Initiative found that 4.4 million Americans or 31.8 per cent of those who were unemployed have been jobless for a year or more, a historic high rate for the period since the end of World War II.

According to the study, this long-term unemployment rate has doubled since 2009; some analysts suggest that the rate is even higher since many of the long-term unemployed who give up looking for work are not included anymore in the unemployed figure. And they warn that figures that point to a fall in the rate of long-term unemployment are thus misleading.

In any case, long-term unemployment becomes a structural, as opposed to a cyclical, problem; since the longer the workers are out of work, the harder it is to find work as their skills tend to deteriorate.

The Obama Administration and the Democrats argue that reducing unemployment will require additional fiscal stimulus. But there is a zero chance that Congress would approve more government spending. And no one expects that new steps by the Fed to loosen monetary policy would have any short-term effect on the unemployment number.

So it is not surprising that American voters are angry. The consensus among political experts is that under current economic conditions, which are clearly not going to improve by much in a year, Mr Obama would probably fail in his bid for re-election. This would be especially so if he ends up facing the former Governor Mitt Romney, a relatively moderate conservative, as his Republican challenger.

Yet what Mr Romney and other Republicans have to offer to re-energise the economic recovery and create new jobs is to cut taxes and reduce government spending. Opinion polls indicate that most Americans do not believe that such policies are going to improve things.

But if you are in your 50s and have been looking for a job for more than a year and your kid who has just graduated from college also cannot find a job, why would you re-elect the person who has been presiding over this economic 'recovery' for the last three years?

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