Is 8.6% good or bad for Obama?

The unemployment rate dropped a lot in November from  9.0% to 8.6%.

That’s good news for us and for President Obama. right?

I’m not so sure.

First, let’s dive into the numbers.

Job growth has been around 100,000 per month for the past couple of months.

But, until November, the unemployment rate has been stuck at 9%.

Hmmm.

Most folks argue that 100,000 to 200,000 is what’s required to handle population growth —  the new workers entering the market.

But, in November, 125,000 new jobs pushed the unemployment rate down by .4% – which is huge.

Couple of reasons.

  • There are different surveys used to calculate job growth and unemployment rates.  It could be that one of the surveys is whacky … either there were more jobs added than reported, or unemployment is under-reported.
  • The jobs numbers for the immediately prior months were revised upward.  That means that unemployment may have been over-estimated … that the rate really is 8.6% now, but it’s a drop from, say, 8.8% … not 9%
  • Most important, about half of the apparent drop in the unemployment is attributable to folks dropping out of the workforce … people who are unemployed but have stopped even looking for new employment.

My bet is that the jobs number is right and that the unemployment rate didn’t really fall by .4% … maybe it fell by one or two tenths of a percent … but not close to 1/2 percent.  My eye is on the jobs number.

OK, let’s not quibble over the numbers.

The question is: will November’s 8.6% help or hurt President Obama’s re-election campaign.

Short-run, the President should get an approval bump from the unemployment rate headlines.  That’s fair.

But, the new lower number may be an albatross in 2012.

Here’s why.

The unemployment rate is likely to move back up because, historically, as the economy appears to be bouncing back, unemployed folks who aren’t looking for work re-enter the job market and start looking again.  In other words, the unemployment rate may creep up because the denominator is getting bigger.

So, even if a modest recovery is taking place – something I don’t believe to be true – the labor market dynamics work against the President.

Pundits have been saying that Obama will be ok with a high unemployment rate in 2012 as long as the trajectory is in the right direction.  That is, that unemployment is coming down.

Here’s my scenario, unemployment will creep back up and Obama will be facing a high unemployment rate that is rising.  That’s not good.

Further, if Obama chest-pounds the 8.6% now, Congress has less pressure to “pass it now.” So, he may get less of his jobs bill through.

Politically, Obama might have been better off if the rate had stayed closer to 9% … he may be in the awkward position of having a high unemployment rate that’s going in the wrong direction.

It’ll be interesting …

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