Business Times - 07 Feb 2012
New job numbers could be a political 'game changer'
By LEON HADAR
WHILE addressing new economic numbers showing 243,000 new American jobs in January - including 50,000 manufacturing jobs - US President Barack Obama seemed to be going out of his way to contain the expected enthusiasm manifested on the same day in the rising Dow.
The new numbers showed that the 'the economy is growing stronger' but there remained 'still far too many Americans that need a job', Mr Obama told an audience in Virginia on Friday.
But if Mr Obama sounded a somewhat restrained note in public there is no doubt that he and his economic and political aides were in a good mood in private last week. Currently at 8.3 per cent, the unemployment rate is in its lowest level since Mr Obama has entered office. That unemployment has been falling consistently for several months may not a sign that the economic recovery is finally taking off. But if the rate of job creation continues to accelerate in the coming months, there is a good chance that more voters will assign better grades to Mr Obama's management of the economy.
Indeed, last month's results of a New York Times/CBS News opinion poll suggested that for the first time in a year, more Americans were saying that the economy was improving rather than getting worse. And the survey also pointed out to a slight increase in the number of Americans who believed that Mr Obama was making progress in dealing with the economy.
One should recall that a sense of political foreboding was descending on the White House late last year when the American economy's jobless rate was stuck at 9.1 per cent, many economists were warning of the possibility of a double-dip recession and Mr Obama's public approval ratings were falling to new lows. That the job numbers and the state of the economy could still take a turn for the worse before November remains a possibility - especially if the crisis in the eurozone brings about the collapse of that monetary system. An Israeli or American military attack on Iran would trigger a war in the oil-rich Middle East and bring about rising global energy prices - and that could derail the US economy.
And Mr Obama's overall approval rating remains below 50 per cent in most polls, which is a dangerous place to be if you want to get re-elected for a second term.
But with the leading Republican presidential candidates being drawn into a political bloodbath and as the prospective nominee Mitt Romney is being attacked by all sides as a super-rich business executive out of touch with financially distressed Americans, the perception that the economy is improving is playing into the hands of Mr Obama.
He also continues to enjoy wide public support, especially among independent voters, for his handling of foreign policy and national security. It was not surprising therefore that Mr Romney and other Republican politicians were not congratulating Mr Obama for the better-than-expected jobs numbers and blamed him for not getting the economy even better.
'Last week, we learned that the economy grew only 1.7 per cent in 2011, the slowest growth in a non-recession year since the end of World War II,' Mr Romney said in response to the new numbers. 'As a result, the percentage of Americans in the job market continues to decline and is now at a level not seen since the early 1980s. Nearly 24 million Americans remain unemployed, underemployed, or have just stopped looking for work. Long-term unemployment remains at record levels.' He added that the new job figures 'cannot hide the fact that President Obama's policies have prevented a true economic recovery'.
The Republicans have also been provided with new political ammunition after the release of the new budget outlook by the bipartisan Congressional Budget Office (CBO) last week which highlighted that the American economy will remain in bad shape in the short term. According to the CBO's forecasts if the current tax cuts are allowed to expire and the planned cuts in federal spending are implemented, the economy will grow by 2 per cent in 2012, and then by 1.1 in 2013.
The economy will grow by a higher rate in 2012 and in 2013 if the tax cuts remain in place and the spending cuts are not carried out. But that could raise the federal deficit into the stratosphere and force the economy into bankruptcy. These forecasts help dramatise the economic dilemmas facing Washington as recessionary aftershocks and mounting deficits leave policymakers with very few attractive choices.
Mr Obama will argue during the campaign that short-term fiscal stimulus financed in part through tax increases on the super wealthy are needed in order to ensure continuing growth and the protection of the interests of a struggling middle class, and that what the Republicans are offering in the name of fighting deficits is an austerity programme that would only help wealthy Americans like Mr Romney and devastate the rest. A continuing stream of good economic news is bound to help Mr Obama sell this message while making the job of the Republican candidate more difficult. From that perspective, the new jobless numbers could amount to a political 'game changer' or they may be recalled after a Republican victory in November as a one-day celebration.
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.