Terrible Jobs Report for Obama 2012
By Matt McDonald, (202) 822-1205, mmcdonald@hamiltonps.com
Today’s job report was bad across the board, missing the benchmark for the President to get to eight percent unemployment by Election Day, missing most analyst expectations, and putting an exclamation point on a week of bad economic numbers.
The survey of employers indicated just 54,000 jobs created after a string of decent months. The survey of households wasn’t much better with just 105,000 new jobs, and the unemployment rate rising to 9.1%. Additionally, the numbers were revised down for both March and April.
Interestingly, this is the first report in some time that has shown any significant increase in the labor force, with 272,000 new workers. Unfortunately for these new workers, there were more of them than there were jobs to be had.
Politically, this report is terrible for the President and will set the stage for continued speculation by the media on his economic vulnerability. This week has seen a number of stories on how the unemployment rate may impact the President’s reelection campaign:
- Binyamin Appelbaum in The New York Times wrote on historic trends for employment data and reelections
- Luca Di Leo in The Wall Street Journal wrote on the Conference Board projecting a 8.5 percent unemployment rate at the end of 2012 and what that means for the President’s reelection
- Nate Silver at The New York Times examined the complexity of interpreting jobs data in an electoral context
With all the coverage, it is worth briefly revisiting what the jobs number tells us and doesn’t tell us about the President’s reelection campaign.
The unemployment situation is a quantitative measure that factors into the qualitative decision of voters. It is not predictive of electoral outcome, but it does contribute to voter decisions, so it is worth tracking progress on jobs over the coming year.
There are multiple aspects of the unemployment situation that complicate the picture, including: the rate itself; the trend of the rate; the anchoring effect of what people are used to (e.g., 5.4 percent in 2004 was attacked as a “jobless recovery” after lows below four percent in the late 1990s); the difference between the household survey and the establishment survey.
So why is 8 percent a good political gauge today for progress on the jobs front?
- This is the number that the Administration defined as success for the stimulus. That is probably too much to ask of an economic model, but that’s what they did, and now they have to live with it. (See Gov. Romney’s launch speech yesterday)
- Eight percent vs. seven percent is an important psychological jump, for the same reason that people try to sell you things for $9.99. The difference between 8.1 and 7.9 is mentally bigger than the difference between 8.3 and 8.1.
- No President in the era of the televised campaign has run for reelection with a rate in the eights. This will become a talking point itself, and will necessitate the uncomfortable reelection argument of “Things could have been worse.”
It is important to note an unemployment rate above eight percent does not guarantee defeat, and below eight percent does not guarantee victory. There are no guarantees in politics. But the marker is important politically and is worth tracking. Today’s number was not on track for the President to pass the eight percent benchmark.
Matt McDonald is a partner at Hamilton Place Strategies and a veteran of two Presidential campaigns and the White House. Prior to joining HPS, Matt worked for McKinsey and Company. He holds an MBA from MIT’s Sloan School of Management and an undergraduate degree in economics from Dartmouth College.