How a Little Bit of Good Economic News Can Be Bad for the President

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.

This post originally appeared at Robert Reich’s blog and is posted with permission.

4 Responses to "How a Little Bit of Good Economic News Can Be Bad for the President"

  1. Aintnorep   January 10, 2012 at 2:12 pm

    Well yeah and its worse than that. The media still doesn't get that we're stuck in the Great Stagnation and events like Recessions and weak recoveries are taking place in that context.
    If there's not a Recession this year, there will be next year. Since Obama has never come clean on how bad things really are, if the Double dip hits before the election, he's toast: assuming of course, the Republicans can actually put up a candidate.

  2. Mike Ladehoff   January 11, 2012 at 4:05 am

    I'm from central US, and I can tell you things aren't getting any better. But with the current clowns from the Repugs, probably will vote Obama again, unless Huntsman catches fire.

    I think we are so fragile that if the Europe thing gets any worse, it will knock us off our feet again. JMO

  3. JohnV   January 12, 2012 at 9:54 pm

    While I agree with the scenario of an uptick of the unemployment rate due to optimism, I wonder what the extent of this uptick might be. It could be predicted to some degree if we know the composition /demographics of the discouraged. For example, those of the discouraged who are in their mid 60s may have opted for early entry into Social Security retirement. Knowing the composition will give us a clue of how high unemployment may tick back up, and the power to demonstrate the ability to anticipat and predict could benefit the Admin.