Saturday, April 2, 2011

The Job Isn't Finished

A couple of months ago, James Pethokoukis of Reuters observed that, for Barack Obama, the number for re–election may not be 270 (as in the number of electoral votes that are needed) but 215 (as in how many thousands of jobs need to be gained — on average — every month between now and November 2012 if the unemployment rate is going to drop below 8%).

Well, actually, Pethokoukis reported that Matt McDonald, an analyst for Hamilton Place Strategies, made that observation.

No matter who said it, I was reminded of that number when yesterday's jobless report came out. Lo and behold, 216,000 jobs were added in March.

Mission accomplished — for March.

That is a significant number, and it will continue to be significant for Obama's electoral hopes because, as McDonald told Pethokoukis, the national unemployment rate has been above 7% in only four presidential election years since 1960. The incumbent was on the ballot each time — and, in three of those elections, the incumbent was defeated.

The exception was Ronald Reagan, who had seen unemployment drop by 1.3 percentage points in the year leading up to his re–election campaign.

So, using that as an historic yardstick, Obama needs unemployment, which currently stands at 8.8%, to drop to about 7.5% in order to have the expectation that joblessness won't be the crushing election issue that it was for Presidents Ford, Carter and Bush I.

That still would be higher than the rate under Reagan, McDonald acknowledges, but the decline in a year's time would be comparable, and that should lead to a sense that joblessness is easing.

McDonald gives Obama a break. Based on his calculations, the unemployment rate would slip below 8% — barely — by Election Day.

He sets the bar much lower than I do. I look at it in terms of duplicating what contributed to the only successful re–election strategy under comparable conditions in the last 50 years. To get close to the unemployment rate that still permitted Reagan to campaign plausibly under the slogan "Morning in America," way more than 215,000 jobs need to be added to the economy on a monthly basis.

I'm not an economist, though, so I'll rely on McDonald's figures, and he does make a compelling case:
"If we assume a straight–line projection of job growth and further assume 120,000 new entrants to the job market every month, the economy would need to create 215,000 jobs per month every month between now and November 2012 to get the unemployment rate below 8 percent. Every month we are above 215,000 new jobs, it gets a little easier to reach that 8 percent goal and every month we are below 215,000, it gets a little harder."

Well, we broke even in March.

According to McDonald's formula, the ultimate goal is neither easier nor harder to achieve than it was before.

There is still much work to be done.

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