Poor Job Growth is Bad For America, But Good For Mitt Romney
The government just announced that the unemployment rate remained constant at 8.2%.
Is this a sign of weakness or strength?
What are the economic and political implications of the report, especially for incumbant president Barack Obama and GOP rival Mitt Romnety?
Here are some of the key take-aways.
Economics Talking Points:
The number of jobs grew by 84K, as compared to expectations of 125K. Analysts believe that unemployment will decrease if new jobs are 150 K or higher. Tepid job growth in government and private areas. Extra hours worked per week were up .1%. The labor force participation rate remained the same at 63.8%. Unemployment insurance is running out for some people giving them more incentive to find jobs. This did not have much effect on the unemployment numbers. Treasuries are higher this morning, a sign of investor concern. Stock prices are expected to open lower. Corporations are not expanding because there is great uncertainty in America and in Europe. Is this a recovery at 84K new jobs? No, by most accounts. At the low point in 2008, the economy had lost 8.5 million jobs. Since then 4 million have been recovered. Fed stimulus was responsible for a large amount of job gains. No growth in education jobs or health care. For health care, discretionary spending is down causing some concern in the sector.
Political Talking Points:
Blaming Bush will be a great component of the Democrats' agenda. The economy is moving sideways, a phenomenon that will not sit well with the American people. Voters are angered that job growth has been anemic. Voters are attributing results to Obama performance and congressional obstruction. Leadership relating to the economy will be front and center. Which candidate is better qualified to get economy back on track? Most people don't recognize how close we were to abyss in 2008, so the improvement since then will carry less weight for Dems. Neither party is making a good case for their economic policies. The unemployment rate does not accurately describe the plight of minorities and certain industries. For instance, black unemployment was at 14.4%. The key to job recovery will be to pick the president who can bring confidence back to corporate America. Until these companies expand, job growth will be unsatisfactory.
Summary: The jobs report is bad for America, but good for the Romney campaign. Economic acumen is Romney's forte, while Obama has struggled. In fairness, Obama inherited a mess, but this argument is not going to hold water on election day. Also, Obama's efforts have been hampered by an obstructionist Congress, which is in part occurring because the president has not been able to create a working relationship with his adversaries. And finally, world events, economic and political, have impacted the the confidence level of business people, who seem to be waiting for the light at the end of the tunnel.
If Romney hopes to win the election, he must capitalize on this bad news. Incidentally, one important analyst predicted that unemployment will be at 8% on election day. The implications of this dire forecast are huge for Obama because the pessimism among workers and voters will remain at a high level.