The Daily Caller

The Daily Caller

Obama White House likely to lose jobs debate as economists predict double-digit unemployment rate

The bloody-knuckled brawl this year over whether President Obama is bringing back jobs will go a long way toward deciding whether Democrats in Congress retain their hold on power past this year’s midterm elections. At this point, according to economists, it’s a fight that is stacked against the White House.

Even if the economy begins to show modest job growth, as it is expected to soon, the overall unemployment rate is likely to stay at its current level of 10 percent, or continue to rise, according to most economic experts.

“I would expect it to start drifting steadily up to 10.5 percent,” the president of the nonpartisan Economic Policy Institute, Lawrence Mishel, said.

That is a major problem for a White House that promised just a year ago that the unemployment rate would not rise above 8 percent as long as Congress passed the $787 billion stimulus bill.

“To show that the recovery is not a jobless recovery they need to get it back to where they initially projected it, around 8 percent,” the director of the New America Foundation’s economic growth program, Sherle Schwenninger, said.

All evidence suggests that will be an extremely tall order.

The Senate is set to take up a $154 billion jobs bill — the Congressional Budget Office scored it at $180 billion — passed out of the House in December. Mr. Mishel said that even with a $400 billion second stimulus, which he favors, the unemployment rate would likely only come down to 9.7 percent or so by the fall.

“The job numbers will go up, but the unemployment rate is still going to remain uncomfortably high for some time, even if it improves,” said Jeffrey Schott, with the Peterson Institute for International Economics.

The Democrats’ majority in the House and 60-seat filibuster-proof majority in the Senate – both at risk this fall – will likely rise or fall based on what judgment the country comes to on this central issue.

Complicating Democratic efforts to stimulate job growth is the growing concern among many Americans, and many foreign creditors, about the nation’s exploding budget deficit and national debt. Spend too much on jobs, and you push the deficit even higher. Spend too little, and the employment picture stays grim.

The president and congressional Democratic leaders have already begun to focus their rhetoric on the “job growth” metric, in an attempt to nudge public attention away from the unemployment figure and toward more favorable measurements. They’ll also point to gross domestic product, which contracted for much of 2008 and 2009 but is forecast to grow by 2 to 3 percent a quarter.

“I think we are on a path of, you know, of steady progress, that by all accounts, you know, GDP, which grew in the third quarter of last year, is going to grow even more strongly when we get the numbers for the fourth quarter,” said Christina Romer, the chairman of the President’s Council of Economic Advisers, during an appearance Sunday on ABC’s This Week with George Stephanopolous.

“And I think, you know, if you look at basically every forecast, they are saying steady GDP growth over 2010,” she said. ” The real question is going to be, is it going to be strong enough to really add a lot of people back into employment?”

The answer to that question is probably in the negative, but Democrats are trying to make the case that they can survive without that.

“If when in fact November rolls around, GDP has grown significantly, and people begin to see that job creation is existing and continuing, while we may not have a dramatic downturn [in the unemployment number] … they’ll reward us on election day,” said New Jersey Sen. Robert Menendez, the current chairman of the Democratic Senatorial Campaign Committee, in an interview.

The unemployment rate does not always go down even when there are job gains because the economy often needs to create at least 100,000 new jobs a month – sometimes even double that – just to keep pace with the number of new entrants into the work force.

Friday’s job number demonstrated another dynamic, where the economy lost 85,000 jobs but the unemployment rate stayed flat at 10 percent. The reason it did not increase is because the overall labor force shrank, as 661,000 jobless Americans gave up their search for work. If those unemployed workers had remained in the labor force, unemployment rate would have risen to 10.4 percent, according to EPI’s Heidi Shierholz.

The contraction of the labor force only adds to the Democrats’ challenge in nudging the unemployment rate down. If jobs do begin to return, that may encourage many of the jobless who gave up back into the market, increasing the size of the labor force and likely causing the overall unemployment number to rise.

There are currently about 3.6 million “missing workers” who are currently not looking for work but who likely will if jobs begin to be added to the economy.

So far, Obama has focused on a narrative of saving the economy from total collapse and beginning to turn the ship of state around and pointed in the right direction. But much of the country has not responded favorably to the White House’s decision to spend most of its first year on health-care reform.

“When Americans think the top priority for government … should be job creation, for six months all they’ve heard Congress talk about is health-care reform, not job creation,” Mississippi Gov. Haley Barbour told The Daily Caller.

Sen. Ben Nelson, the Nebraska Democrat who cast the deciding vote to pass the Senate health-care bill, said late last week that “it was a mistake to take health care on as opposed to continuing to spend the time on the economy.”

“Working on the economy would have been a wiser move,” he told the Fremont Tribune, a local newspaper in Nebraska.

It is an uphill slog for the Obama White House, which will try to persuade the country it is turning things around even as it faces renewed concerns over terrorism in the U.S. and manages two wars in Afghanistan and Iraq.

Obama acknowledged Friday that in December the job market “slipped back, losing more jobs than we gained.”

Romer, on Sunday, acknowledged that when she delivered the job numbers for December to him in the Oval Office Friday, the president was “subdued” and “disappointed.”

“We’re all desperate to see progress,” she said.

The president, on Friday, attempted to point to a positive: “The overall trend of job loss is still pointing in the right direction.”

While that is true, it is small consolation to most Americans, and the White House knows it. They also know that this issue will continue to plague them past this fall’s midterms.

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  • gamara

    This is all the product of peoples stupidity in the housing market and will continue until it is allowed to correct itself.

    The value of anything should not outpace inflation significantly. adding 50k of updates to a house might give it 50k of additional value, but a home purchased in 2003 for 200K should never have sold for 300k in 2005, but that was the case in several areas of the country. Amazingly, some of the worst hit dealt with this.

    Here is the problem. You pump up the value of this house by 100K. That is 100K, borrowed, that pumps up other areas of the economy. There is an abnormal increase in the economy propped up by the influx of cash from people selling houses for an undue profit. This cycle continues as that influx of cash increases salaries which then brings more people into the housing market who now in 2007 are looking at this house for 450K. In 4 year the value of the house has more than doubled while the cost of other goods increased on average 7 or 8 percent. This was fueled by lending that was being supported by spending related to the inflated value of the homes.

    The bubble bursts and there is no more money to lend. People cannot sell the over inflated homes for what they purchased them. Not only is there no longer the artificial stimulus proping the economy up with the influx of cash, but there is now a void of cash as people lose jobs, take pay cuts, and have to save to make sure they can continue paying off the loan they took out.

    The governement throwing money out as stimulus will lead to devaluation of the dollar which will equate to increased inflation on everyday goods. This will further strip the available cash in the economy and PROLONG the issue instead of shortening it.

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  • tahoeeditor

    “Stephanopoulos” misspelled

  • thetruth

    Stupid article. Let’s see what happens to all these “economists predictions” in November.

    After all, Bush did not create a SINGLE new job in his first four years, unemployment increased every year he was in office, and he was still elected for the first time in 2008 after having been se-lected by the SCOTUS in 2000.

  • dividist

    I think the administration should continue to focus on how many jobs they have “saved” while unemployment sticks at 110%. Then they can expand the meme by explaining how many new wars the administration didn’t get us involved in, while we are adding 30,000 troops to the old wars. After all, he kept us out of Sri Lanka.

  • leepeters

    Brings to mind this cheeky parody: Federal Trade Commission Launches Investigation Into Accuracy of “Economic Enhancement” Claims http://optoons.blogspot.com/2009/08/federal-trade-commission-launches.html

  • leifeiriksson

    If Bush and Obama really cared about creating jobs, they would cut spending so they could cut taxes and shrink the governments burden on the private sector. Governments can’t create jobs, they only take resources from the private sector and create make-work, paper-pusher, unproductive jobs.