The Economic Recovery Is Proceeding at a Standard Pace. Is That Good Enough for Obama?

Agenda-Setting Financial Insight.
Sept. 7 2012 2:36 PM

The Economic Recovery Is Proceeding at a Standard Pace. Is That Good Enough for Obama?

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Obama has called the new jobs report "not good enough."

Photo by SAUL LOEB/AFP/GettyImages

Thirty months after the U.S. jobs nadir, employment has risen by 3.1 percent, according to Friday’s report for August. That’s roughly in line with the post-recession record of the last 2-1/2 presidents - but far short of Ronald Reagan’s 9.8 percent jobs increase. The picture for August alone was also mixed: President Barack Obama, his Republican presidential rival Mitt Romney, and the Federal Reserve can all take something from it.

The increase in total employment in the 30 months following recessions was 3.8 percent under George W. Bush starting in 2003, and 3.4 percent under George H.W. Bush and Bill Clinton from 1991 to 1993 - though Clinton’s economy exhibited more robust job growth later in the cycle. On this comparison, it’s hard to argue Obama’s record on job creation is noticeably weak. Republicans willing to reach back 30 years, however, can point to much stronger numbers under Reagan.

As for August, the net new jobs figure of 96,000 was distinctly under par - fodder for the Romney camp. Yet the unemployment rate, measured by a different survey, declined to 8.1 percent. Another 0.2 percentage point drop would take the rate below 8 percent, surely a psychological threshold that Obama’s team would play up.

Beyond the headline numbers, the report underlined the sluggish nature of America’s economic recovery. The manufacturing sector lost 15,000 jobs, while overall new jobs figures for both June and July were revised lower. And the decline in the unemployment rate was mostly the result of reduced participation in the workforce. The ratio of total employment to population in August was only 0.1 percentage point above its December 2009 nadir. On this metric, Obama’s record looks poor. Thirty months after the previous three recessions, that metric had improved much more strongly, by at least one percentage point.

In any event, both presidential candidates will get talking points from the new data. The Fed, which meets next week, also gets a new input for its analysis. The U.S. central bank has indicated that it is leaning toward another round of so-called quantitative easing - essentially, bond purchases that amount to printing money. The lackluster report on Friday won’t discourage Fed Chairman Ben Bernanke from pushing ahead - and sooner rather than later.

Martin Hutchinson covers emerging markets and economic policy, drawing on 25 years of experience as an international merchant banker. He ran derivatives platforms for two European banks, before serving as director of a Spanish venture capital company, advisor to the Korean conglomerate Sunkyong and chairman of a U.S. modular building company