Why isn’t Obama doing better? Why isn’t Romney? The answer is jobs.
Early October brought an unseasonal chill and a handful of snowflakes to America’s northern states. The candidacy of Barack Obama seemed to catch a chill also. Presidential polls tightened after a first debate in which Mr Obama struggled to defend his economic record against the attacks of his Republican challenger, Mitt Romney. Yet the sledding has been harder for Mr Romney than might have been imagined, given the jobless figures.
The American economy lost almost 9m jobs between January 2008 and early 2010. It remains 4.5m jobs short of the pre-recession employment peak—a height it will not regain for another 32 months at recent job-creation rates. Still, bookmakers think the president more likely to win than not. The simple explanation for the tight race is the ambiguity of the economy’s recent performance: too weak to make Mr Obama a shoo-in, too strong to earn him a sacking. The issue of jobs adds to the complexity.
Despite wintry flurries, the Midwest’s economic weather seems to be turning balmier. The unemployment rate is below the 7.8% national figure in swing states like Ohio and Wisconsin. In Janesville, Wisconsin, home of Paul Ryan, the Republican vice-presidential candidate, the unemployment rate dropped from 13.9% in August 2009 to just 8.6% in August this year. Some businessmen in the area say they are planning to increase hiring. A worker at a local petrol station says he has turned “cautiously optimistic”.
That same modest momentum is slowly emerging in national figures. Retail sales were up 5.4% in the year to September, and new housing starts in September were up 35% from a year ago. The September drop in the unemployment rate, from 8.1% to 7.8%, allows Mr Obama to claim that the unemployment rate has not increased on his watch. Unemployment is down substantially from a 9.0% rate a year ago. Economic confidence is rising. Support for Mr Obama may follow. Voters are usually reluctant to toss out incumbents who bring improvement, however limited.
Yet there is another side to the recovery. Even as activity picks up on Main Streets, the legacy of hard times is unmistakable. In a Janesville coffee shop, a woman suggests that this is a silver lining, not a sunrise: things feel better because homes are cheap and many of the jobless have moved away. She has a point; since the worst days of the recession in Janesville, not long after the closure of the venerable General Motors plant, the number of unemployed in the city has fallen by about 4,230 while employment has fallen by 461. The difference represents those who have given up searching for jobs or have moved away.
Across America, the story is much the same. Labour markets are recovering; employment has risen by 4.3m jobs since early 2010. But much of the observed decline in the unemployment rate has come from the departure of discouraged workers: to early retirement, to collect disability insurance, or to linger on the fringes of the workforce, supported by other household members. The share of America’s population that is working, a measure which takes account of labour-force dropouts, plunged during the recession and has scarcely recovered. This is the Obama record against which Mr Romney would prefer to run.
Mr Obama’s inauguration, however, was not the beginning of America’s troubles. Neither was the onset of recession in late 2007. The share of Americans working never fully recovered after the 2001 recession; job growth in the recovery from that downturn was slower than after any recession since 1948, including the most recent.
Earnings have stagnated; the inflation-adjusted income of a typical American family is back where it was in the mid-1990s. Jacob Hacker, a political scientist at Yale University, calculates an “economic security index” which tracks the proportion of Americans who see their disposable household income (after debt service and medical costs) decline by 25% or more from one year to the next. The index hit a new high during the recession, as more than one in five Americans experienced a drop in such income of 25% or more. But the index has been rising steadily since the mid-1990s. Even when households have been flush with cash, demands such as rising health-care costs have left them in perilous economic straits.
The campaigns are reluctant to bring up this broader perspective. It reflects poorly on both candidates. Mr Obama has been unable to provide relief in four years. Mr Romney, as a Republican, is tarnished by the Bush administration’s performance. Silence also comes from a lack of consensus about the source of the troubles. Inequality has been rising for three decades. The share of income earned by labour, as opposed to capital, has fallen over the course of a generation. Neither party can easily blame the other for these long-term trends. Yet they are an important part of the backdrop of the national election, as they have been for over a decade.
Voters may not hold grudges on November 6th. Political scientists reckon that economic fundamentals strongly influence the performance of the incumbent party in big elections, and that voters place the biggest emphasis on the most recent trends in such things as income and employment. The perception that hard times were retreating carried both Franklin Roosevelt and Ronald Reagan to re-election, in 1936 and 1984, despite economic struggles earlier in their terms. It is discomfort with recent performance that leaves Mr Obama facing such a tight race. Economic models predict a virtual dead heat.
One last month’s worth of jobs data— October’s—will be released before the election. Whatever the numbers, Mr Obama will be unable to make a Reagan-like claim that morning has returned to America. If Mr Romney is unable to capitalise on this, that may be because of his failure, matched by his opponent’s, to offer the country a convincing explanation for its long-run labour-market troubles.
(The Economist)
