What looked in November 2008 to be a mandate for change, in retrospect appears to have been a visceral plea to create jobs. When Barack Obama took office the unemployment rate was 7.7 per cent. Now it is 10 per cent – and the US president has a huge problem on his hands.
In fact it is far worse than the official numbers indicate. If you include the workers who have dropped out of the labour force because they cannot find work, those who are “part-time of necessity” and others who are “marginally attached”, then the real rate is 19.1 per cent of the labour force – or 30.4m people – as opposed to the 15.3m that are officially counted.
The administration rightly points out that Mr Obama’s $787bn stimulus helped cushion the collapse in the jobs market – and claims, although without strong back-up data, that the stimulus has saved or created up to 2m new jobs.
But the public sector jobs saved by the stimulus and the temporary jobs created by short-term hiring for America’s decennial census have been dwarfed by the continued large-scale shedding of labour in manufacturing, retail and construction. The effect on Mr Obama is devastating.
“When we think of Obama we think of all the huge election crowds in places like Portland, Oregon,” says Leo Hindery, a telecommunications executive who was John Edwards’ senior adviser in the election campaign. “But it was only when the result in Ohio came through that we realised he had won the presidency. In terms of jobs the people of Ohio have been hit hardest.”
While the economy is stronger today than most policymakers feared it would be a year ago, the jobs market is in worse shape than anyone anticipated. Republicans hammer the White House for predicting last January’s stimulus would stop unemployment from rising above 8 per cent – even though that estimate was not out of line with the private sector consensus at the time.
The jobs news is not all bad. When Mr Obama came to office the US economy was shedding more than half a million jobs a month. It did so for six successive months from November 2008 to April 2009. In recent months the rate of job losses has slowed sharply. The economy actually added jobs in November 2009 (admittedly only 4,000) and, while it lost 85,000 the following month, average job losses for the quarter were down to 69,000.
But the economy needs to generate more than 100,000 jobs a month just to keep the unemployment rate flat given an expanding workforce – more, if discouraged workers start looking for jobs again. So most economists anticipate the unemployment rate will bounce around its current official level of 10 per cent through the summer before starting to edge lower in the second half of the year. They also point to the last two recoveries, both of which were relatively “jobless”, with strong employment growth only coming several years after growth had resumed.
“Unfortunately, the financial headwinds, lingering labour market problems and a cautious attitude of consumers and businesses in the wake of the financial crisis make it likely that the recovery in employment terms will also be slow this time,” says Eric Rosengren, president of the Boston Fed.
Mr Obama is planning to give a final shove to speed the jobs recovery through further targeted stimulus measures such as more infrastructure spending and a hiring tax credit for small companies.
But the likelihood of a dramatic turnround in time for the November midterm elections looks low. Moreover, even when the headline rate starts to fall, the administration will face severe structural problems in the jobs market. Four out of 10 Americans now without work have been unemployed for more than half a year – and the share of the population in the jobs market and looking for work is at its lowest level since 1985.