With meager jobs growth, 'time running out' for Obama

Evidence is mounting that the US economy has slowed in recent months, a development that, if it continues, may put voters in a sour mood as the clock ticks toward Election Day. 

The latest proof of that slower pace came Friday, when the government reported that the economy added only 115,000 jobs in April, down from a gain of 154,000 in March and an average of 252,000 per month between December and February. The widely watched unemployment rate came in at 8.1 percent, down from 8.2 percent in March.

It's entirely possible that the outcome of the presidential election will hang on the answer to this question: Will the economy and job growth reaccelerate between now and November, or will they remain in a low gear?

If the economic news is bad now for President Obama, whose stewardship of the economy is being disparaged by Republicans, the months ahead may be less discouraging: Economists and labor experts expect to see some modest improvement. Even so, job growth is unlikely to be enough to make many Americans feel good about their economic prospects.

“I think growth is going to be moderate for the rest of the year, and this will not be a plus for President Obama running for reelection,” says Sung Won Sohn, a professor of economics at California State University, Channel Islands.

Economist Linda Hooks at Washington and Lee University, in Lexington, Va., does not expect any “clear improvement” in the next two or three months. By the middle of the summer, she says, the economy's performance might be a little stronger. “The numbers will improve, but time is running out for Obama,” says Ms. Hooks.

The timing of any improvement could be critical for the president and, by extension, for his challenger, Mitt Romney. Americans start to make their own assessments about the economy about six months before the general election. Do they know people who are unemployed and can’t get a job? Do they feel confident they won’t get laid off? Are they feeling good enough about the economy to buy a new car or to remodel their home?

So far, those assessments are not positive for Mr. Obama. In polling, Quinnipiac University has found that 70 percent of the people surveyed say the economy still feels as if it’s in a recession.

“A small majority in recent polls said the economy is beginning to recover, but that has leveled off,” says Peter Brown, assistant director of the Quinnipiac University Polling Institute in Hamden, Conn.

Optimism about the economy had picked up early last winter when companies started to hire in more significant numbers. But some economists say this was because the weather in much of the country was warmer, allowing construction crews to begin projects and inspiring people to shop for new cars. Now, the economy is merely “decelerating” from that growth spurt, says John Canally, chief economist at LPL Financial in Boston.  

In the months ahead, he expects the economy to create 175,000 to 200,000 jobs a month. This would be considered moderate growth – enough to provide jobs for people entering the workforce each month.

However, jobs alone won’t be the only factor voters weigh in assessing the economy, Mr. Canally notes. A year ago, gasoline and food prices were rising. Now, gasoline prices are down 17 cents a gallon from this time last year, and food prices are falling as well. “That’s a plus for consumer confidence and spending,” says Canally.

But that may not be enough to get businesses to start hiring again. On Thursday, Mr. Sohn was in Chicago to talk to 50 small-business owners at a conference.

“I was amazed at their pessimism,” he says. “They talked about how they have poor sales, they are burdened by excessive government regulation, and they are facing uncertainty about Obama’s health-care plan,” he recalls. “These uncertainties are major constraints in hiring people.”

That is likely to be a recurring theme in the campaign leading up to November. On Friday, House Speaker John Boehner, in a statement, called the employment numbers “more evidence President Obama’s policies aren’t working for families and small businesses, and aren’t creating enough jobs to get our economy back on track.”

The White House tried to put a more positive spin the numbers. After the Bureau of Labor Statistics (BLS) revised upward the number of jobs created in February and March by 65,000, Alan Krueger, chairman of the Council of Economic Advisers, noted that the private sector gained 697,000 jobs during the first three months of the year – the largest quarterly increase since the first quarter of 2006. Add in the April numbers, and 827,000 private-sector jobs have been created.

Mr. Krueger also noted that the unemployment rate has dropped a full percentage point since August, when it stood at 9.1 percent.

However, one reason the unemployment rate is falling is because more Americans don’t perceive that jobs are available and are dropping out of the workforce, say some labor market observers. On Friday, the BLS reported the labor force had shrunk by 342,000 for the second consecutive month.

“This is the lowest labor market participation rate in 30 years,” says Christine Owens, executive director of the National Employment Law Project (NELP), which lobbies for the jobless in Washington. “There is a sense there are not any jobs out there or a feeling they are not jobs people want to pursue.” 

One reason some people may be discouraged, she says, is because many people are losing their unemployment benefits. This year, an increasing number of states will be dropping the extended unemployment benefits, which gave the jobless in high-unemployment states an extra 20 weeks of jobless benefits. 

According to a NELP analysis, 12 states have already dropped the extended benefits program. On May 12, another eight states will drop them. On June 9, California, Florida, Illinois, and New Jersey – all states with relatively large numbers of unemployed – will drop the program.

The unemployment rate alone will not determine how people vote, says Ms. Owens. “People will want to know [that] their leaders are taking the jobs issue seriously and are making proposals to create good jobs,” she says. “That will be the litmus test for this election.”