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Right Turn
Posted at 11:56 AM ET, 05/06/2011

What do the job numbers mean?

The jobs numbers for April were released today. It’s a mixed picture. I asked Matt McDonald, a partner in the consulting firm of Hamilton Place Strategies, what it all means. Matt served as a senior adviser to Sen. John McCain during the 2008 presidential campaign and to Gov. Arnold Schwarzenegger’s reelection campaign. From 2005 to 2006, he was associate communications director at the White House with responsibility for economic issues. In 2004, he was the rapid response director for President Bush’s reelection campaign. He has also worked as a consultant for McKinsey & Co.

The economy added 244,000 jobs but the unemployment rate went up to 9 percent. Is this a political problem for President Obama — as the economy improves, more enter the workforce and the unemployment rate looks horrible?

It’s actually even worse than it looks. The unemployment rate went up because of a divergence of the surveys, not an increase in the number of people looking for jobs. In the household survey, which determines the unemployment rate, we lost 190,000 jobs in April, and only 15,000 new people entered the workforce. Hopefully, the two?????? surveys will both indicate robust job growth soon, but not this month.

There is certainly danger for the president in the number of discouraged workers who are not in the labor market. As they reenter, a rising unemployment rate will be a headline risk for the White House. But we have to start creating jobs on a robust consistent basis before that happens, and despite a good headline number today, we are still looking at a very mixed job market.

Is it the national unemployment rate that matters or the rate in individual swing states?

There is certainly more attention paid to the national rate than the individual states, but both are just statistics trying to measure the state of the economy. What really matters politically is how individuals perceive and experience economic conditions, both as a snapshot and directionally. To the extent that state numbers reflect that experience more accurately at the local level, they are important indicators to watch.

If we look at the battleground states as of the last state-level jobs report, Nevada, Florida, Michigan, North Carolina, Colorado and Ohio all have worse unemployment rates than the national average. If the president loses these, but wins all the other battlegrounds (Indiana, New Mexico, Pennsylvania, Wisconsin, Minnesota, Virginia, Iowa and New Hampshire), he loses reelection. Now of course, there are a lot of factors beyond the unemployment rate alone, but it helps give a sense of the economic challenge the president faces politically.

How many total jobs will Obama need to get the rate to 8 percent? to 7.2 percent?

Today, the president needed 189,000 jobs per month to get to 8 percent on Election Day, and he needed 247,000 to get to 7.2 percent. These are the number of jobs needed in the household survey, and in the household survey this month we lost 190,000 jobs. So obviously, we missed the benchmark pretty badly. The other thing to note is that in our model, we assume labor-force growth of about 130,000 workers per month based on CBO projections. This represents college graduates and other new workers entering the labor force. This month’s report indicated that only 15,000 new workers entered the labor force, and seems to signal that there are still many discouraged workers out there.

What’s the highest unemployment rate (excluding the 1930s) at which the incumbent president was reelected?

The four highest rates of unemployment during a presidential election since World War II are: 1976 (7.8 percent), 1980 (7.5 percent), 1984 (7.2 percent) and 1992 (7.4 percent). These are the only elections in that time frame when the rate was above 7 percent. In 1976, 1984 and 1992, the rate was actually heading down from the high, but of these four examples only in 1984 did Reagan win reelection.

If the rate is still above 8 percent on Election Day, that would be a historically high rate for a president to be seeking reelection. The rate should be heading in the right direction by that point. The question is whether [President Obama] will have the robust growth needed to get to that successful Reagan-level (admittedly a landslide). Today’s number doesn’t indicate that, all else equal.

By  |  11:56 AM ET, 05/06/2011

Categories:  Economy

 
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