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10 percent unemployment: A real headache for Obama

By
November 7, 2009

For months he had warned it was coming but that didn’t ease the political shockwaves for President Barack Obama when unemployment topped 10 percent.

A year after his election Obama finds it increasingly difficult to blame the sour economy on George W. Bush or offer reassurances that jobless Americans will soon find work.

Never mind that the economy itself grew in the last quarter, that the recession, as measured by the precise formulas used by economists, is over and that the number of jobs lost in October was less than one-third the number of job losses at the start of his presidency.

Those claims about the recession’s end do not convince people who remain painfully aware of the unemployment rate.

At 10.2 percent, October unemployment climbed to chart-topping heights unseen in more than a quarter century. The bottom line is that more than 15 million Americans are out of work and 3.5 million lost their jobs while Obama was president. Expected or not, this is Obama’s new reality.

“I won’t let up until the Americans who want to find work can find work, and until all Americans can earn enough to raise their families and keep their businesses open,” the president declared Friday.

That’s a hopeful promise but not very realistic.

And it shows that, for the time being, action to tackle record budget deficits will simply have to wait.

Obama, appearing at the White House Rose Garden on Friday three hours after the jobless numbers were made public, said his administration was looking at additional spending for roads and bridges and energy efficient buildings. Additional tax cuts for businesses and steps to increase credit for small businesses were also on the bill.

The new unemployment rate also came on the same day Obama signed a $24 billion bill to extend jobless benefits and spur homebuying

In a sign of Democratic thinking, Rep. Carolyn Maloney, who heads Congress’s Joint Economic committee, said Democrats would consider new aid to states, an “infrastructure bank” to increase construction jobs and small business tax credits.

“I think we’re witnessing a political renaissance about concerns about jobs,” Lawrence Mishel, president of the labor-leaning Economic Policy Institute, said approvingly. “It will put the deficit concerns into their appropriate context.”

What all this amounts to is another stimulus for the economy. Though don’t look for Democrats to call it that; Democrats have a tough enough time debating the merits of the $787 billion stimulus Congress passed earlier this year.

Republicans were quick to pounce on the proposals. Internal polling by the Republican National Committee after Republican gubernatorial victories in New Jersey and Virginia showed that Republican candidates could do well by arguing against additional spending while promoting job growth through tax cutting alone.

But in rhetoric and in deed, Obama is being forced to address an unemployment picture his economic team had long ago expected to avoid.

Many economists predict the jobless rate will rise again, peaking at 10.5 percent sometime next year before employment makes a turnaround in the spring. That still means unemployment will remain high for some time. The administration’s own projections still see unemployment at 8 percent by the end of 2011.

Such lingering discomfort can have economic and political consequences.

Consumer spending likely won’t increase rapidly. Foreclosures will continue to rise, hitting not just subprime borrowers, but prime mortgage holders as well. Commercial real estate lending, already teetering, could plunge in the face of rising vacancy and loan delinquency rates.

Politically, Democrats are staring at some damage — and the fear of unemployment — themselves. Exit polls Tuesday in the New Jersey and Virginia GOP victories showed that the economy was the top issue in the minds of voters. And national public opinion surveys show that a majority of the public doesn’t believe Obama’s economic policies are working.

Couple that with traditional losses by the president’s party during midterm elections and Democrats have cause to worry about their own fate.

The unemployment number masks the fact that job losses slowed compared to past months — the work force went down by 190,000 in October compared to 219,000 in September. What’s more, the Bureau of Labor Statistics said job losses in August and September had been overstated by 91,000.

In addition, the economy grew by 3.5 percent in the third quarter. And Christina Romer, a top Obama economic adviser, noted an increase in temporary service jobs. “That’s often the first sign of firms kind of dipping their toe back into hiring people,” she said in an interview with The Associated Press.

But since the start of the recession in December 2007, 7.3 million Americans have lost their jobs and key sectors — construction, manufacturing and retail trade — are still seeing significant declines.

The president has not been helped by reports of flaws in the administration’s count of jobs created by the $787 billion stimulus.

Ten months into the job, Obama did not even try to lay the blame for the economy at Bush’s feet, as he has in the past. His only criticism was implied.

“When we first came into office, our immediate goal was to stop the free fall that caused our economy to shrink at an alarming rate,” he said. “We’ve succeeded in achieving that goal, as our economy grew last quarter for the first time in a year.”

But Obama has already taken ownership of the economy.

Republicans, he noted wryly during a July speech in Michigan, were eager to blame him for the economy.

“That’s fine,” he added, “Give it to me!”

Four months later, it would be hard to give it back.

___

Jim Kuhnhenn covers economics and politics for The Associated Press.

Posted by on November 7, 2009. Filed under FUBAR. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

21 Responses to 10 percent unemployment: A real headache for Obama

  1. almandine

    November 10, 2009 at 7:31 am

    I think interest rates would not have to go past 3% or so to set it all straight. Almost every other country is debasing their currency as are we, only not as ruthlessly. Part of their problem is that they are tied to us in many cases. Let the dollar recover just a little and the markets will swoon.

    Inflation will start slowly for sure, but the worldwide currency debasement means that ALL will have to pay more for less. Ain’t it great to be a banker?

  2. almandine

    November 9, 2009 at 9:54 pm

    It won’t be that soon, because that would set the hounds free. Those who hold our debt don’t want their paper to be immediately worthless, and they haven’t quite figured out how to jam us with the high hard one. The question is, and will be, can the Fed use interest rate increases to shove the genie back into the bottle… at least long enough to shield itself (including from us) from a violent demise. The possibility seems rather remote, but stranger things have probably happened.

    John Nadler provides an interesting perspective:

    http://www.kitco.com/ind/nadler/nov062009.html

  3. griff

    November 10, 2009 at 1:23 am

    Well I do hope you’re right regarding the time frame, but I didn’t mean that hyperinflation will appear suddenly one morning. I agree that they can’t let it happen too fast, but we’ll se prices start rising by late winter or early spring I think. They already have been rising on some items.

    Gas is creeping up, the dollar’s sinking, gold is skyrocketing, and all these foreign investors are practically begging us not to devalue the dollar any further.

    The IMF just released 200 metric tons of gold and India scarfed it all up. Foreign investors are trading in dollars for other currencies and gold. In fact, everyone seems to know what’s coming but us. Most of us, anyway.

    The jig is certainly up. I don’t see the Fed raising interest rates high enough to stave this off. If they were thinking along those lines they would have been raising them incrementally already.

    I do see them trying another bailout. The last one seems to be all that’s propping up the fictitious market right now.

  4. Sandra Price

    November 10, 2009 at 5:46 am

    America is the football in this super bowl of corruption all over the world. We have the most to lose and we are prepared for the downfall.

    America is what the voters make it. The Constitution was the document to control the government not the people. The voters want to be controlled and they will get their wish.

    We signed our own destruction when the voters refuse to discuss “religion and politics.”

    We spend valuable time and space on the internet trying to find the source of our misery and we forget the mirror. Above it is assumed that President Obama won due to his desire to be President. But then I often have trouble following Issodhos’s comments.

    You are right, Griff, the jig is up and the people are responsible; we built the corruption.

  5. almandine

    November 10, 2009 at 7:46 am

    Regarding the economy, the quality of our elected reps, and our collectivist future, Religion is NOT the problem. It’s that band of crooks who have seized our govt. Focusing on religion is like trying to fix a faucet drip while the roof has a great hole in it from a meteor strike in a rainstorm.

    We DO have the most to lose, but we are NOT prepared. Not even close.

  6. griff

    November 7, 2009 at 9:17 am

    Yeah, Obama’s answer to everything…spend, spend, spend.

    Extending unemplyment benefits so people will have another 14 weeks before they have to go on welfare and food stamps.

    You go congress!

    And the fabled turnaround is always ’round the next corner. Next spring will turn to next summer, then to next fall, then to next winter.

    The stupid American donkeys perpetual pursuit of the carrot on the string…always just out of reach but oh so enticing, irresistible. Keep your eye on the carrot, and never mind the cliff that’s rapidly approaching. It’s only a mirage, say the experts.

    By then we’ll be immersed in another presidential campaign where the candidates will once again promise the moon and the stars. And once again, we’ll believe ‘em.

    Yes We Can – Be Had Again!

  7. Kent.Shaw

    November 7, 2009 at 10:20 am

    Griff, I tend to agree. But, I don’t have any answers. Do you have any ideas as to how the U.S. should try to dig itself out of this hole? Of course one obvious answer is to severely curtail the military budget and the wars/occupations overseas along with closing many of the hundreds of overseas bases, at least in my opinion. Military contracting is chock full of fraud, waste and abuse. There are strict rules in regard to all of that which are increasingly being ignored. Other than that, any ideas?

    Kent Shaw

  8. Kent.Shaw

    November 7, 2009 at 10:09 am

    A real headache for Obama, eh? What about the “headaches” now suffered by the one out of five people unemployed in this country. Are they allowed to have “headaches” too?

    Kent Shaw

  9. Warren

    November 7, 2009 at 2:18 pm

    17.5% true unemployment.

    From the New York Times yesterday:

    In all, more than one out of every six workers — 17.5 percent — were unemployed or underemployed in October. The previous recorded high was 17.1 percent, in December 1982.
     
    This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time.

    Here’s a link to the article

    —W—

  10. griff

    November 7, 2009 at 2:17 pm

    One of Obama’s campaign promises was to renegotiate NAFTA, the trade treaty that he repeatedly took Clinton to task for during the campaign as being a large part of the unemployment and economic problems we face.

    Another would be to call our representatives and urge them to pass H.R.1207 and S.604 in their original form. Right now they’re attempting to water down and make toothless a simple two paragraph bill.

    Audit the Fed so we can expose their malfeasance and criminal ineptitude. Urge the Congress to resume their constitutional mandate of oversight of our currency. Until that happens we’re just throwing bad money after bad.

    Not only has the Fed bailed out banks in this country, the Fed has bailed out foreign banks as well. They routinely enter into secret agreements with foreign governments and foreign banks, essentially playing poker with our chips.

  11. frank verismo

    November 7, 2009 at 3:05 pm

    On the (ahem) money as usual, Griff.

    “Audit the Fed so we can expose their malfeasance and criminal ineptitude. Urge the Congress to resume their constitutional mandate of oversight of our currency. Until that happens we’re just throwing bad money after bad.”

    On this very subject – and any future America may have – I give my unalloyed recommendation to the following:
    http://www.youtube.com/watch?v=dDkxwVBbUV4&feature=related

    Frank

  12. Carl Nemo

    November 7, 2009 at 4:49 pm

    Thanks Frank Verismo for the Gerald Celente link. The guy talks from both his heart and soul about this engineered raping of America. As far as I’m concerned Celente and myself are one! : )

    Carl Nemo **==

  13. bogofree

    November 7, 2009 at 4:41 pm

    This is like paying off a credit card that charges 23.9% with one that gives you zero interest for 6 months and then repeating the process.

    The bailouts/stimulus have not trickled down….oops…trickle down can only be used to define a Republican economic policy.

    Sooner or later the bill becomes due. This will not be something to be paid off in a boom economy but one that will take many generations.

  14. Warren

    November 7, 2009 at 6:33 pm

    They way it will be paid off will be through inflation. If the loan is too much to pay off, well, reduce the amount of the loan. In this case, by making the dollars to be repaid cost less.

    Are you ready for it? It’s coming.

    —W—

  15. bryan mcclellan

    November 7, 2009 at 7:20 pm

    A total of Five Gentlemen Graduated yesterday as Green Technologists.
    I graded their papers, I wished them luck.
    I cried on the way home as there are no jobs to refer nor prospects thereof, as none have a steeper climb today than the honest hard working American.
    Sucks, it do.

  16. Kent.Shaw

    November 8, 2009 at 2:14 pm

    I don’t see how we are going to avoid hyperinflation. It will destroy me and millions of others. I literally will be living in the streets, as I will be taxed out of my modest home. At least I’ll be able to default without guilt on my credit cards.

    Kent Shaw

  17. Hoosier_CowBoy

    November 9, 2009 at 1:22 pm

    Imagine it was John McCains headache, could he blame the past 8 years of GOP control for the spiraling unemployment?

    Anyone paying attention understands that the policies of the past Administration were designed to scuttle the economy, enrich the privledged, and cripple the social safety net.

    Its working well. I doubt Obama will be able to dig out of the hole he was thrown into in January 2008.

    The only thing the GOP needs to worry about is if the wine remembers.

  18. griff

    November 9, 2009 at 2:04 pm

    What policies exactly are you referring to and how did they cripple the economy? And what has Obama done to reverse those policies?

    Please let us all know. While Bush was indeed a terrible president, the major foundation of our economic woes today can be traced back to the Clinton administration, not Bush. Obama even said as much during his primary battle with HRC.

    Bush was quite conservative in comparison to Obama, who thinks we need to triple the deficit in order to get out of debt – an incredibly ridiculous notion. In fact, Obama’s budget will increase our deficit this year alone by half of what Bush did in his first six years in office, and that’s not counting emergency funding for the wars and the healthcare fiasco.

  19. issodhos

    November 9, 2009 at 11:39 pm

    I would suggest that cadidate Obama was not the mythical Reluctant American citizen who had to be pushed or “thrown” into assuming the mantle of the presidency, but rather pole-vaulted into it with a lust for power every bit the match of any before him. As to the “hole”, it was being dug long before President Obama was even born.:-)
    Yours,
    Issodhos

  20. bogofree

    November 9, 2009 at 6:42 pm

    He now owns it. This is now Obama’s mess. When will double digit inflation hit?

  21. griff

    November 9, 2009 at 7:51 pm

    “When will double digit inflation hit?”

    As soon as those trillions of dollars being held by the Chinese, Saudis and others flood back to these shores. I give it 6 to 12 months.