May’s troubling jobs numbers threw the Obama administration under the bus. With unemployment now at 9.1%, the country is antsier about getting solutions to our jobs problem, and getting them fast.
59% of Americans gave the president a thumbs down for his handling of the economy in the latest Washington Post-ABC poll out Wednesday, up from 55% a month earlier. The president also lost the “Bin Laden bounce” in his overall approval ratings, which have fallen to 47% from their 56% bump after the al-Qaeda leader was nabbed. In the run-up to 2012, the rising pessimism has saddled Obama with a nearly impossible task: convincing voters that, despite the fact that joblessness is looking worse, his economic policies are actually on the right track.
That raises the question: How much can Obama really do to fix unemployment in the short-term? During the midterm elections last September, Harvard economist Edward Glaeser made a good point on this:
Wise voting and wise policy require us to recognize two central, almost contradictory, truths about the government and the economy: economic policy does affect people’s lives and the economy, and less obviously, most of what happens in the economy has little to do with government policy.
Of course voters want to think that their leaders have all the control. And studies show that voters tend to favor incumbent presidents when the economy is doing well. But the idea that the president controls the short-term dial on the unemployment rate, or economic growth for that matter, is entirely off. A study by former Council of Economic Advisers chair Christina Romer and David Romer, for instance, finds that changes in tax rates (a central theme in the jobs debate) account for less than one-tenth of the variation in GDP growth. Even monetary policy, considered a speedy lever for altering interest rates, isn’t a quick fix for jobs. A recent report by the St. Louis Fed finds that, even though monetary policy may affect interest rates short-term, it’s not clear that those translate into higher growth or employment rates in the short term.
And yet, in response to the clamor for immediate action, the Obama administration is rolling out plans for jobs training programs that promise to put people back to work. But even here, studies show that the benefits of these types of programs — in terms of boosting jobs and wages — are often short-lived. They die once the funding wears off.
The sad truth is that high unemployment will be sticking around, for long after 2012. The McKinsey Global Institute predicts that getting employment back to its pre-recession peak could take five years. And if you take the long view on U.S. joblessness, that isn’t Obama’s fault. Jobs recoveries have increasingly lagged economic recoveries in every recession since 1991, according to analysis of Fed data by economist Raghuram Rajan. That’s led to a rise in chronic unemployment levels over the years, which are even harder to fix.
That makes Obama’s jobs problem more political than economic, because policies that lead to sustainable employment in the long-run — better education, regulation, social insurance — take more than one term to pull off. In that sense, judging Obama for the economic message he uses to stay in office is fair game. But blaming him for the country’s joblessness is not.