By Mike Dorning - Mar 10, 2012 2:01 AM GMT+0700
A surge in new jobs last month that held the U.S. unemployment rate to 8.3 percent highlights a strengthening economy that bolsters President Barack Obama as he approaches the November election .
The jobs report “is another plus for the president,” said Stu Rothenberg, editor of the nonpartisan Rothenberg Political Report in Washington.
President Barack Obama at the Daimler Trucks North America Freightliner plant in Mount Holly, North Carolina on March 7, 2012. Photographer: Nell Redmond/UPI/Landov
March 9 (Bloomberg) -- James Guyette, chief executive officer of Rolls-Royce North America, talks about the February employment report, the outlook for U.S. economy and expansion prospects for the company. Guyette speaks with Mark Crumpton on Bloomberg Television's “Bottom Line.” (Source: Bloomberg)
“These numbers suggest the economy is moving in the right direction,” he said. “It’s likely to make people more optimistic, and that’s always, always good for an incumbent president.”
Employers added 227,000 jobs in February, more than forecast, the Labor Department reported today in Washington. The median projection of economists in a Bloomberg News survey called for a 210,000 increase. Job growth was revised upward for the prior two months.
The unemployment rate held steady after dropping for five consecutive months from 9.1 percent in August.
“For voters who are used to an unemployment rate that starts with a 9, this looks like progress,” said Dan Schnur, a campaign adviser to Republican presidential candidate John McCain’s first bid for the White House in 2000. “It might not be a huge victory for Obama’s re-election campaign. But it’s not going to be a significant drag on him either.”
‘Better Days Ahead’
Obama said the jobs report shows “the economy is getting stronger” in a speech today to workers at a Rolls-Royce Holdings Plc (RYCEY) factory in Prince George County, Virginia, that manufactures jet engine parts. “It gives me confidence there are better days ahead.”
Rick Santorum, a former Pennsylvania senator seeking the Republican Party’s 2012 presidential nomination, said today the economy is recovering “in spite of” the Democratic Obama administration’s policies.
“Certainly a quarter of a million jobs, roughly, being added is a positive step forward,” Santorum said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” airing this weekend.
The administration “has consistently seen, you know, bad job reports because of bad policies that have led to those job reports,” he said. “And eventually, you know, the economy does recover, in spite of the headwinds that this administration has put in its place.”
Gasoline Prices
The strengthening economy is beginning to translate into greater public optimism, even with recent increases in gasoline prices.
Consumer confidence climbed to a four-year high last week, according to the Bloomberg Consumer Comfort Index (COMFCOMF). For a fifth straight week, half of those surveyed also rated their personal finances as positive, bolstered by a resilient stock market, faster job growth and rising wages.
The Commerce Department last week reported that the economy grew at a 3 percent annual pace in the final quarter of 2011, up from a 1.8 percent gain the prior three months.
A pickup in economic growth during an election year is helpful to an incumbent president such as Obama, said Christopher Wlezien, a political science professor at Temple University in Philadelphia and co-author with Robert Erikson of the forthcoming book “The Timeline of Presidential Elections.”
“It matters more and more as time goes by. It probably matters more now than it did three months ago,” he said.
Slow Improvement Forecast
While potential threats loom -- such as further gasoline price increases, a war in the Middle East or a worsening of the European debt crisis -- most private forecasts anticipate slow improvement in the unemployment rate in the months before Election Day, Nov. 6.
“Over the last several months, the economy has gone from being a net negative for Obama to probably something close to a wash,” said Schnur, director of the Unruh Institute of Politics at the University of Southern California in Los Angeles, interviewed before the release of the jobs report.
The trajectory of the economy is typically much more important in presidential elections than the actual unemployment rate, Wlezien said.
“The point is really are we getting better or are we getting worse and how fast is it changing,” Wlezien said. “Whether the unemployment rate is 6 percent or 9 percent matters less.”
Reagan’s Victory
For example, there was not much difference between the 7.5 percent unemployment rate when President Jimmy Carter lost re- election in November 1980 and the 7.2 percent rate four years later when President Ronald Reagan won re-election by a landslide, he said.
The distinction was the trend lines as each president went before voters. Under Reagan, unemployment had dropped 1.3 percentage points during the 12 months before the election; under Carter, joblessness had risen 1.6 percentage points over the same time period.
The median projection for unemployment during the final quarter of the year is 8.1 percent, according to a Bloomberg News survey of 75 economists conducted Feb. 3 to Feb. 9.
Joel Prakken, senior managing director of Macroeconomic Advisers LLC in St. Louis, who is among those projecting the 8.1 percent jobless rate, said a drop below 8 percent by the election is “within the margin of error” of the forecast. That would break a psychological barrier and further boost public confidence, he said.
Monthly Surprises
“I wouldn’t discount the possibility,” Prakken said. “It’s surprised many how quickly the unemployment rate has fallen. If we just got one or two more monthly surprises, it could be below 8 percent before the election.”
Unemployment rates are difficult to project as the economy recovers from recession because of the way the indicator is computed, Prakken said. Only people actively seeking work are counted as unemployed. As an economy improves, workers who had given up looking for a job typically resume seeking one and consequently add to the number of people counted as unemployed.
The economy needs to add 125,000 jobs per month to keep up with population growth, Prakken said. Employment growth must be higher if discouraged workers pour back into the job market, as happened in February.
The labor force participation rate, the share of working- age people who either have a job or are seeking one, rose in February to 63.9 percent from 63.7 percent.
Underemployment Drops
The so-called underemployment rate, which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking, decreased to a three-year low of 14.9 percent from 15.1 percent.
The slow-growth scenario that most forecasters anticipate sets the stage for a “classic glass-half-full, glass-half-empty argument” between the political parties over the jobless rate during the summer, Schnur said.
Republican front-runner Mitt Romney previewed just such a critique on the night of the Super Tuesday Republican primaries on March 6, arguing that 8.3 percent unemployment may be the best the Obama administration can achieve, yet the country “can do better” than an 8 percent rate.
The White House has focused on the progress made since Obama took office in January 2009. The U.S. lost 818,000 jobs that month.
“We’re picking up from a relatively slow growth rate,” Prakken said. “It’s good news for the president but it’s still pretty dicey.”
To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net
To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net
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