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Monday, Jan 9, 2012 8:22 PM UTC

Obama’s good news problem

The recent glimmer of hope for the economy could actually hurt the president's reelection chances

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Topics: U.S. Economy, Great Recession, 2012 Elections,

Obama's good news problem (Credit: AP/J. Scott Applewhite)
This originally appeared on Robert Reich's blog.

Two years ago the unemployment rate was 9.9 percent. Now it’s 8.5 percent. At first blush that’s good news for the President. Actually it may not be.

Voters pay more attention to the direction the economy is moving than to how bad or good it is. So if the positive trend continues in the months leading up to Election Day, Obama’s prospects of being reelected improve.

But if you consider the number of working-age Americans who have stopped looking for work over the past two years because they couldn’t find a job, and young people too discouraged even to start looking, you might worry.

The Bureau of Labor Statistics, which measures the unemployment rate every month, counts people as unemployed only if they’re looking for work. If they’re too discouraged even to enter the job market, they’re not counted.

If all the potential workers who have dropped out of the job market over the past two years were counted, today’s unemployment rate wouldn’t be 8.5 percent. It would be 9.5 percent. That’s only a bit down from the 9.9 percent unemployment rate two years ago.

The genuinely good news, though, is the Bureau of Labor Statistics also tells us 200,000 new jobs were added in December. Granted, this doesn’t put much of a dent in the 10 million jobs we’ve either lost since the recession began or needed to keep up with the growth of the working-age population (at this rate we won’t return to our pre-recession level of employment until 2019) but, hey, it’s at least the right direction.

But here’s the political irony. This little bit of good news is likely to raise the hopes of the great army of the discouraged – many of whom will now start looking for work.

And what happens when they start looking? If they don’t find a job (and, let’s face it, the chances are still slim) they’ll be counted as unemployed.

Which means the unemployment rate will very likely edge upward in coming months. This will be bad for the President because it will look as though the trend is in the wrong direction again.

Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written 13 books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org. More Robert Reich.

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