Obama Economic Team Outlook Presumes No Job Growth For All of 2010
Presidential approval and the performance of the party in power in elections has historically been tied to economic performance, and more specifically job growth. This has been proven time and again, including with this Administration, as the President’s approval ratings and Democratic performance in the generic Congressional ballot have sunk with the economic bad news.
If the main players in Obama’s economic team – Treasury Secretary Tim Geithner, Council of Economic Advisers head Christina Romer, and OMB Director Peter Orzsag – can be believed, there is no relief on the horizon for jobs, meaning what you see is what you get for the midterms:
Employment and unemployment. In terms of the labor market, the forecast projects average job growth of about 100,000 per month in 2010, about 200,000 per month in 2011, and about 250,000 per month in 2012. Typically following a recession, we see increases in productivity, temporary employment, and the length of the workweek before employment begins to recover. For the most part, developments in recent months have been following this pattern. Productivity growth has surged; temporary help employment has risen for 5 consecutive months; and the workweek has been generally rising. We expect to begin seeing job gains by sometime this spring.
100,000 jobs a month will not keep up with the expanding population of job seekers; historically it takes at least that many jobs created to maintain the same unemployment rate. So what Orzsag, Romer and Geithner are saying here is that the unemployment rate will remain close to 10% until the end of this year – 9.5% at the absolute best.
You can talk about base enthusiasm or the halo effect of passing major legislation or all the rest, but job numbers like that are absolutely frightening. As Atrios said today:
If I’d gone back in time to the end of 2008 and told the incoming Obama administration that they would pass a large stimulus bill, but nonetheless unemployment would rise to around 10% by the end of the year and then stay there for about another year and that Jonah Goldberg would, at some point, say something intelligent, they probably would have been more likely to believe the latter than the former. If they did believe me, they would have freaked because 10% unemployment for an extended period is really really bad.
Despite some rhetoric about a jobs agenda (which has faded into the distance recently), there continues to be no sense of urgency about the jobs picture. There are enough pieces of legislation (the $154 billion dollar extenders bill, the $100 billion “Local Jobs for America” Act) in the pipeline to stimulate growth somewhat, and the hiring around the US Census will provide a short-term boost, but official Washington seems more concerned with chasing the ghosts of inflation than doing anything meaningful to arrest the jobs crisis. So it goes on, despite the electoral imperative, from the perspective of the Democrats.
Maybe the bipartisan effort to end Chinese currency manipulation would help, but I fail to see the leverage to get China to concede that. I certainly don’t see the kind of hardball tactics that Paul Krugman outlines coming into play anytime soon.
The contentedness in Washington, from practically all sectors, about millions of people out of work, drives the sense in the rest of the country that the political system is simply broken.