The Labor Department announced Friday that the unemployment rate went down to 8.5 percent last month, and the sonorous thumping on the ceiling in the basement of the White House press room was, according to highly placed sources, the result delirious dancing in the aisles of the West Wing above it.
Okay, none of that is true, but it’s pretty clear the White House was buoyed by the news, and Republicans were left stammering, “Yes, but . . . ”
But . . . yes but happens to be right.
The numbers were indeed nice, with 200,000 jobs created. But this pretty rainbow arching over the economic horizon obscures some frighteningly dark clouds that will continue to haunt President Obama’s reelection prospects.
First of all, 200,000 is not crazy good, particularly during the holiday hiring season. It would take years at this rate to bring the unemployment rate down to the five percent range we had gotten used to. And even if hiring continues at around this pace – not at all guaranteed, given other economic factors – the unemployment rate will not continue to fall easily in the near term because people will start looking for jobs once more, and then they are counted again as among the jobless.
It still seems very unlikely we will be below or even at 8 percent by Election Day.
Certainly, there’s intense focus on unemployment as a political matter. Not only is this seen as a bellwether for the economy, but compassionate Americans actually do care for their fellow citizens. But there is little reason for optimism on several other indicators that carry major weight with voters.
First of all, the economy in 2012 is not expected to grow above 2.5 percent. It’s not a recession, but it does suck.
Gasoline prices are not going down anytime soon. They’ll likely remain at about their current level of in the mid-$3 range. And if the Iran situation explodes, fuhggedaboutit. Through the roof.
The housing market is going to remain sluggish next year, avoiding the Grand Recovery everyone is waiting for. So people will head over to Zillow sometime before Election Day and figure out their biggest investment is still a turkey.
What’s more, stocks are not expected to rise much, meaning that between stock values and home prices, no one is going to feel much richer.
Americans are also deeply worried about the federal deficit, which is about as likely to become trimmer as a pig on a chocolate-covered truffle farm. Obama will attempt to blame Republicans for this. But everyone knows who sets the agenda in Washington. It’s not the Speaker of the House.
Kiplinger, the widely respected financial advice and forecasting outfit, puts it succinctly:
The good showing in December likely isn’t the start of a surge. The labor market faces some high hurdles. Overseas growth is slowing in Asia, and Europe is sliding into a recession. In the U.S., housing demand remains weak, revenue-strapped local governments continue to lay off workers and businesses are slowing down their purchases of new equipment. As a result, gross domestic product will grow only about 2.3% in 2012, well short of the 4% or more that is typical in a recovery.
Obama has made many mistakes in his handling of the economy, which as a result will not be staging a strong rebound. There is an awful logic at work here that campaign consultants and spinmeisters will not be able to shoo away.