Great news: Jobless rate expected to drop in 2012 to … 8.5%
posted at 11:36 am on November 10, 2010 by Ed Morrissey
In a measure of just how much the lack of economic growth under Barack Obama has impacted expectations, The Hill predicts that Obama may have a much better re-election campaign in 2012 because of a decline in the unemployment rate. How big a decline? Economists predict that it will have dropped just one percentage point from its current 9.6% level to 8.5%, a number that will supposedly put a strong wind at the backs of incumbents, according to one economist and political analyst:
Economists who study the labor market said this week that they expect unemployment in 2012 to average 8.5 percent, down more than a point from the 9.6 jobless rate of today.
Heidi Shierholz, an economist at the Economic Policy Institute, said every forecast she has studied predicts rapid job growth in 2012, even though the national number will still be a far cry from full employment.
“It’s still going to be so high in 2012, but people are going to be feeling better,” Shierholz said.
Mark Zandi, the White House’s favorite economist to quote because of his advisory role with Sen. John McCain’s (R-Ariz.) 2008 presidential campaign, sees the same picture.
Zandi said Obama’s stimulus plan has achieved its goal. The plan, Zandi said, prevented another Great Depression while giving the public sector time to kick in and start hiring, which will be in full effect when Obama is running for reelection.
“The trend is going to be in strong favor of incumbents in 2012,” said Shierholz.
James Pethokoukis sounds a skeptical note on both the forecast and the analysis:
I really don’t think so, though Ms. Shierholz from the liberal EPI would surely like that to be the case. There is a huge lag between what the numbers say about the economy and what people perceive. Bill Clinton won the 1992 election on the economy (”it’s the economy, stupid”) even though GDP had been growing for six full quarters. According to Gallup, 88 percent of Americans thought the economy was “fair” or “poor” in October 1992 with some 60 percent saying the economy was “getting worse.”
Two years later, it was the Democrats turn to feel the brunt of widespread economic anxiety as the Republicans captured both the House and the Senate. Even though the economy had then been growing for 14 straight quarters and the unemployment rate was down to 5.8 percent, 72 percent of Americans still thought the economy was “fair” or “poor” and 66 percent though the nation was headed in the wrong direction. Hard to believe, but 3 1/2 years after the 1990-91 recession ended, the economy was still a big negative for voters and hurting the incumbent political party.
So let’s say the unemployment rate is 8.5 percent on Election Day 2012. That is twice as high as what Americans have grown accustomed to. As recently as May 2007, it was 4.4 percent. It was also under 5.0 percent from July 1997 through August 2001. And before this recession, Americans hadn’t seen 8.5 percent unemployment since 1983. In addition, housing will still be in the tank, and budget deficits will still be in the stratosphere. Morning in America II? Good luck with that.
The truly analogous period isn’t 1990-1994 but 1980-1984. In that period following a solid decade of stagnation and runaway inflation (for the US, anyway), the voters gave the boot to a President who tried to sell that as the New Normal in his infamous “malaise speech.” During that year, unemployment grew from 6.3% to a peak of 7.8% during the summer, with a level of 7.5% just before the election. Reagan won the election in part because of frustration over economic drift and in part because of Jimmy Carter’s demonstrated impotence on the international stage after Iran took our embassy staff hostage for 444 days and the Soviets overran Afghanistan.
Afterward, as Reagan implemented recessionary policies in order to wring poison out of the American economy as well as dismantled overreaching regulatory obstacles to growth, joblessness peaked at 10.8% in November 1982. The GOP received a moderate rebuke in those midterms, but nothing on the scale of the first midterms of Clinton and Obama. Why? Because even though those policies had resulted in record unemployment, voters also saw light at the end of the tunnel as the economy began to improve. Two years later, the jobless rate had dropped by a third to 7.2% — still on the high side — and voters rewarded Reagan with a landslide victory of 49 states.
A reduction of a single percentage point in joblessness won’t move the needle for Obama. By the calculations of his economic team, Obamanomics was supposed to prevent unemployment from going above 8% in the first place. By that point, Obama will have had more than three years to improve the economic environment, and 8.5% won’t be seen by anybody as success in that effort. Not only will Obama have a difficult time justifying another four years of malaise in that set of circumstances, but Democrats in the Senate will be defending 13 more seats in the upper chamber than Republicans on the basis of that failure at the same time.
It won’t be a wind at the backs of Democrats in that environment; it will be a boot at their backsides.