By Jonathan Weisman
Washington Post Staff Writer
Saturday, February 2, 2008
The economic storm clouds gathering over the 2008 presidential race burst open yesterday with news that the economy shed 17,000 jobs in January, the first job loss in 52 months and the clearest sign yet that the economy may be in a recession.
For Republicans already facing an economic headwind, the jobs numbers could prove punishing. Traditionally, the party holding the White House is blamed for bad economic times -- and credited for booms -- and economists said yesterday that this year should be no different, even if GOP candidates continue to distance themselves from President Bush.
For Democrats, job losses could complete the anti-Republican narrative their candidates have been building for months.
"This isn't a random event. This is the culmination of a bunch of disturbing trends we've seen in seven years," said Austan Goolsbee, a University of Chicago economist and chief economic adviser to Sen. Barack Obama (D-Ill.). "Stagnant incomes, rising costs in energy and food, and little to no personal savings have left families with no margin of error."
Economists forecasting the 2008 race have given a slight edge to the Democrats. Global Insight, a Massachusetts-based forecaster, was predicting that the Republican nominee will garner 49 percent of the vote in November, based on recent income growth, unemployment and the power of incumbency. With yesterday's jobs report, that forecast will slip to as low as 47 percent, said Nariman Behravesh, the firm's chief economist.
The GOP contenders "are far enough away from the Bush administration where they won't be completely tarred by the Bush brush," he said. "But, nevertheless, there will be a tendency to see Republicans as responsible for this mess."
Obama and Sen. Hillary Rodham Clinton (D-N.Y.) pounced on the jobs data. Clinton proclaimed "a second Bush recession," while Obama blamed the news on "seven years of George Bush's failed economic policies."
Of all the indicators of late, including stagnant economic growth and falling housing prices, job losses have particular political resonance. "When job numbers go down, it's a trumpet sounding that the economy is in trouble and the economy is going to be the number one issue," said Sen. Charles E. Schumer (N.Y.), chairman of the Democratic Senatorial Campaign Committee.
In economic terms, a loss of 17,000 jobs is statistically insignificant. For example, the Labor Department's initial report that only 18,000 jobs were created in December was later revised to a gain of 82,000 jobs, leading some economists to say that January actually may have created a few jobs.
But few economists put a positive gloss on the labor market.
"It's pretty sobering news on the economic outlook," said Douglas J. Holtz-Eakin, a former Congressional Budget Office director and now chief economic adviser to Sen. John McCain (R-Ariz.).
The manufacturing sector -- seen in political circles as a sign of national economic might -- has lost 269,000 jobs over the past 12 months, and 28,000 jobs in January alone. Manufacturing employment now accounts for less than 10 percent of the job market for the first time since data began being collected in the 1930s, said Dean Baker, co-director of the liberal Center for Economic and Policy Research.
Meanwhile, construction employment, the engine of the Bush expansion, shed 27,000 jobs in January, and has fallen by 284,000 since peaking in September 2006.
Those indicators "clearly point to an economy that has, in our view, turned the corner" into a recession, said Bernard Baumohl, managing director of the Economic Outlook Group.
If so, Republicans will have a hard time outrunning Bush's shadow, said Ray C. Fair, an economist at Yale University who has modeled the economy's impact on elections for decades. Because of slow economic growth, Fair had already predicted that the Republican nominee -- weighed down by voter demands for change after eight years of GOP control -- could hope for only 48 percent of the vote. If growth turns even barely negative, the share drops to 46 percent, he said.
"There's no case in history in which we've had a bad recession and the incumbent party has won," he said. "Never."
Advisers to both McCain and former Massachusetts governor Mitt Romney said both GOP candidates are far enough away from the White House to blunt the damage.
"Governor Romney is running as an outsider with experience in the business world, not as a vice president trying to replace a president," said Jim Bognet, a Romney economic adviser.
McCain aides privately acknowledge that their candidate must learn to speak more forcefully about the economy, citing Wednesday's debate in Los Angeles, where he avoided specifics on the issue.
However, his advisers also emphasize that McCain voted against the president's tax cuts in 2001 and 2003. Those votes have been a point of contention in the fight for the Republican nomination, with Romney using them to question McCain's conservative bona fides, but they could prove to be a plus in a general election, as McCain looks to separate himself from Bush, an aide said.
Others are skeptical. McCain has virtually disavowed statements he made in 2001, when he said Bush's tax cuts were too heavily weighted in favor of the rich, and in 2003, when he questioned cutting taxes in wartime. He now wants to extend the cuts, which are set to expire in 2011.
"It depends which John McCain we're talking about," said Jared Bernstein, an economist with the liberal Economic Policy Institute, as he questioned whether McCain could distance himself from Bush. "If you're talking about the John McCain that wants to extend the Bush tax cuts, the answer is absolutely no. They're not called the Bush tax cuts for nothing."