Weak Jobs Market Compounds Bad Local News on the Economy and Budget

Key Question Now: Is President Obama in Trouble?

The local picture is bleak.  A recent Field Poll has the governor’s tax initiative passing 54-35, but most analysts believe those numbers are not strong enough in a traditionally anti-tax state.

The loss of the tax measure would put more pressure on local voters to step up to avoid a catastrophic $7.5 million shortfall to the local schools.  In the meantime, the city faces about $8 million in cuts at the same time it is pushing for at least a $100 million surface water project.

Driving the dismal local news is a still flagging national economy.

Early this year, after the job market posted strong gains, it appeared that the economy, after four long years of recession and struggle, was turning around.  A number of factors have since come into play, but the bottom line is that the economy seems to be still in the positive, but weak.

The jobs number of 80,000 follows the revised figures of 68,000 in April and 77,000 in May.

“This economy has no forward momentum and little help from monetary or fiscal policy,” said Kathy Bostjancic, director of macroeconomic analysis for the Conference Board, as reported in a New York Times article. “As if that were not enough, ill winds are blowing in from both a contracting Europe and slowing growth in emerging markets.”

“The net of it is not as if the economy is collapsing, but it wasn’t really as strong as it looked in December, January and February,” said Jim O’Sullivan, United States economist at High Frequency Economics.

These are critical numbers as the presidential campaigns are about to emerge from their summer doldrums to kick into high gear. with conventions and then the post-Labor Day sprint.

Republicans hope that this means that President Obama is in trouble, while Democrats fear the same.

The media and Republicans quickly jumped on this news.

“The president’s policies have clearly not been successful, in reigniting this economy, in putting people back to work, in opening up manufacturing plants across the country,” Republican nominee Mitt Romney said.

“The president’s policies have not gotten America working again, and the president’s gonna have to stand up and take responsibility for it. I know he’s been planning on going across the country and celebrating what he calls ‘Forward.’ Well, forward doesn’t look a lot like forward to the millions and millions of families that are struggling today in this great country,” he added.   “It doesn’t have to be this way. America can do better. And this kick in the gut has to end.”

President Obama naturally was more upbeat: “We’ve got to grow the economy even faster. And we’ve got to put even more people back to work. Our mission is just not to get back to where we were before the crisis. The problem is we’ve got a stalemate in Washington. This election is about how we break that stalemate.”

Wrote Washington Post’s Chris Cillizza, “Any hope that President Obama will be able to run for re-election bolstered by an improving financial picture is rapidly disappearing.”

“While the June report is bad news in and of itself for Obama’s political prospects, it’s the broader trend line that it reaffirms that should be of the most concern to the White House,” he writes.  “This is the third straight month in which the jobs report has underwhelmed.”

The New York Times wrote, “It is increasingly apparent what the economy will look like when President Obama faces voters in November: pretty much what it looks like today.”

ABC News Blog suggests: “The clock is winding down. Obama backers have argued that it’s the trajectory, not the rate, that will determine Obama’s fate in November. Now, that trajectory doesn’t look as encouraging as it once did.”

Other analysis is more sanguine, however.

One analyst, Floyd Norris, argues for an alternative perspective, writing yesterday, “The recovery has been chugging along slowly for a couple of years, and while it may have slowed a little in the last few months, that change has been minor.”

Part of the problem, he argues, is that the Labor Department adjusts their figures for the season.

Mr. Norris argues that those adjustments may be distorting the real picture these days.

He writes, “Employers are acting more cautiously than they did in previous cycles. They add fewer seasonal jobs than they used to, and they therefore get rid of fewer seasonal workers when the season is over.”

The result, he argues, “is that the seasonal adjustments make things look better than they are in the winter, when fewer workers are being let go than the government expects, and worse in the spring and summer, when the workers who were not let go cannot be rehired.”

“June is the month when the seasonal adjustments call for the largest upward adjustment in private sector jobs, as students find summer work. If there are fewer summer jobs than there used to be, we would expect the June seasonally adjusted numbers to be disappointing,” he notes.

It is an interesting analysis, but we are still faced with the fact that the unemployment rate remains at 8.2%.

Nate Silver, a political analyst for the New York Times, writes, “Before the June jobs report was released, most economists had expected the payroll numbers to revert to something stronger, perhaps 150,000 jobs per month, over the remaining months of the year.”

He argues, “Weakness in May and June had been observed in a number of economic indicators. But there were also glimmers of hope in measures that are arguably more forward-looking: some signs of a rebound in the housing market, a significant decrease in oil and energy prices, and relatively good news out of Europe.”

Like Mr. Norris, he notes, “Other indicators of job growth have been slightly stronger than the government’s payroll report. The government’s separate household survey, from which the unemployment rate is calculated, showed 128,000 jobs added in June, and 127,000 on average over the past three months.”

Part of the problem is that the number of jobs in the economy is difficult to measure.

The real question on everyone’s mind is how this will impact November.  Again, Republicans are hoping that they spell trouble for the President, and Democrats fear the same.

To that Mr. Silver offers an interesting analysis, arguing that the election has reverted into a toss-up, despite a solid string of news and polling numbers for the President in late June.

An interesting wild card in all of this is that, while the numbers are disappointing in the economy compared to what seemed to be the case earlier in the year, the expectations remain quite low.

Mr. Silver, pouring over polling data, argues, “Mr. Obama seems to have gotten the benefit of the doubt from voters. His approval ratings improved some early in the year, but have not yet declined much with recent jobs reports.”

He therefore argues, “The June numbers, then, will represent another test of Mr. Obama’s resiliency. Mitt Romney should have an opportunity to turn the conversation back to the economy over the next few weeks. If he is not able to take advantage of it, then it might be more appropriate for conservatives to fret about the state of his campaign – concerns that seem a bit premature now.”

Earlier this year, we predicted that President Obama would be re-elected if the jobs growth held.  It has not held.

Is the President in trouble?  Not yet, but a few more months of these kinds of reports and he may well be.

There are two interesting wild cards.  For instance, House Ways and Means Chair Dave Camp said on Friday, “Today’s lackluster jobs report is the latest in a string of economic data that should serve as a wake up call for President Obama and the Democrats who control Washington. As our country teeters on the brink of another recession.”

No economist believes that is the case.  Everyone sees a weak recovery at this point.

The second factor is that there is not a whole lot the President can do at this point about the economy.  Certainly not in the short term.

That means that it will come down to the ability to sell the better message.

—David M. Greenwald reporting

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