It’s no coincidence that Bill Clinton and Elizabeth Warren – two high-profile Democratic politicians capable of taking complex financial concepts and boiling them down to terms a non-specialist can readily grasp –– took to the podium at their party’s convention last night. Their job, in part, was to convince not only party loyalists but also the general public that the current economic picture – call it a jobless recovery, if you will – isn’t something that any president can fix with a snap of his or her fingers. If party spinmeisters work their magic today, that may help President Barack Obama to ride out any storm that might follow disappointing job creation data scheduled to be released tomorrow morning.
If there is one piece of economic data that holds the key to the election, Friday’s number is it. GDP growth is a nice figure, but to most of us, it’s abstract. Inflation isn’t that much of a problem (except, perhaps, for gasoline prices today and the prospect of higher food prices in the coming months), so price data isn’t that significant right now. Other data points – consumer confidence, purchasing managers’ indices, etc. – are something that the pros heed, track and understand. But what matters to the vast majority of voters who will head to the polls in November are jobs. Do they have one? Does it pay them a living wage? Do they feel it’s secure? If they lost it, are they reasonably confident that they could find another one?
With the exception of housing market data – which has been showing signs of improvement for several months now – no single economic data point is as important as where the unemployment rate now stands, how many jobs are being created and how long it is taking those unemployed to find new work. The Labor Department’s job creation data for August, released early tomorrow, will shed light on all three.
True, if you happen to be one of those unfortunate folks whose mortgage is underwater and who has been unemployed for the last 18 months, a positive surprise isn’t going to make you feel much better. But as the election debate has turned to the question of whether Americans feel better off today than they did four years ago – or at least, whether they are confident enough that they will feel better if the current administration stays in the White House – the jobs data takes on even greater weight.
We’ll get two more readings on the employment situation before Election Day, including one just four days before voters go to the polls. But even if those numbers turn out to be strong, they may also be too late to win over voters disillusioned by the sluggishness of the recovery from the disastrous events of 2008. And it will be easy for Republican strategists to dismiss positive numbers as a one-off event. What the Democrats really need is a solid to spectacular number this week, followed by a second one in a month’s time.
Here’s how the scenarios play out:
Fewer jobs are created than the 120,000-135,000 that analysts expect: This is a win for the Romney camp. Their message has been that Americans had a right to expect the Obama administration would get the country on the right course; a slow and uneven pace of job creation simply fuels the kind of anxiety that could lead independents and undecideds to jump ship. Even if the Federal Open Market Committee announces a third round of quantitative easing after its meeting next week – as is widely expected – that might boost financial markets but isn’t likely to do much for the job market between now and the election.
More jobs are created than anticipated: The extent to which this is a boon for Democrats depends on the magnitude of any positive surprise. But it’s only a big positive if that solid gain is followed by one that’s even larger this time next month – for instance, if 150,000 jobs were created in August, then skeptical voters will look for an improving trend in September, not a drop or a flat line.
The number of new jobs created is more or less in line with forecasts: This is a grey area. At this point, the Democrats can still hold their ground if they can point to some other element of good news, such as a big or significant dip in the unemployment rate itself or a reduction in the rate of long-term unemployment, a growing concern for both policymakers and economists.
Of course, the irony of this is that any administration today – Republican or Democrat – has less control over job creation than in past decades. We are in the midst of a global crisis, and to the extent that policy decisions – past or current – in Europe or China cause a drop in demand for goods and services produced in the United States, or even make the outlook more uncertain for U.S. companies, they will boost they payrolls only reluctantly, and very, very slowly.
Questioning the president’s economic policy track record certainly is very valid – indeed, it’s vital. But such questioning should factor in the harsh reality that any single nation and its government has far less ability to shape its own economic future than ever before. That is a lesson the United States – still the largest economy in the world, still trying to adjust to the fact that it no longer is the only great economic power – is learning later than other nations have. And it’s the misfortune of politicians of all parties that we have to come face to face with that new reality just as Europe is in crisis and Chinese growth is slowing to levels not seen in two decades or so.