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Republican Message Sinks In Even as Obama Economy Gains Strength

Sunday, 07 December 2014 09:56 AM

To hear Republicans tell it, President Barack Obama is the leader of a lackluster economy -- and Americans believe them.

The only problem: That view is outdated.

Last week’s Labor Department report showed the economy added 321,000 jobs in November, marking 10 consecutive months in which the number has topped 200,000. Average hourly earnings rose 0.4 percent from a month earlier, the most since June of last year. At the same time, most Americans -- 52 percent in a Gallup poll -- said the economy was “getting worse” in November, echoing the Republican message.

“They’ve done a better job of saying, ‘The economy is not working as well as it should have and elect us and we’ll do a better job,’” said John Silvia, the chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina.

For years, House Speaker John Boehner, an Ohio Republican, repeated a simple mantra to needle Obama on the economy: “Where are the jobs?” To the dismay of some Democrats, the White House has avoided declaring victory in Washington’s rhetorical war over the economy because the slow pace of growth has frustrated those who haven’t felt the benefits of the recovery.

The jobs report “will have some impact on the public perception of the economy, as it should,” White House Press Secretary Josh Earnest said Dec. 5. “We certainly welcome those signs of strength. We want to make sure that -- that working folks are experiencing those kinds of benefits, too.”

Public Perception

There are signs that the public perception of the economy already is shifting. The same Gallup poll showed the smallest gap in a year and a half between Americans who say the economy is getting worse and those who say it’s getting better. And Boehner’s “Where are the jobs?” slogan was absent from the statement he released last week after the new economic data.

“While it’s welcome news that more people found work last month, millions still remain out of work, and middle-class families across the country, including my home state of Ohio, are struggling to get by on wages that haven’t kept pace with rising costs,” he said. “The president’s response has been more of the same: the same massive regulations, the same rising premiums, and the same uncertainty for manufacturers and small businesses.”

Until this year, Americans’ frustration was justified, said Ethan Harris, co-head of global economics research at Bank of America Corp. in New York. Income gains were seen only for the richest, and job growth had yet to meaningfully accelerate.

‘Too Optimistic’

“If you go back a year ago, and in fact if you look at the whole first five years of the economic recovery, the public perception was largely correct,” he said. “Forecasters in the government -- both in the Obama administration and the Fed -- were much too optimistic coming into the recovery so they sent out this very bullish view which was disappointed. If they had been a little more conservative, it wouldn’t feel as bad.”

However “in the past year, things have changed,” Harris said. Employers have added an average 240,910 jobs per month through November, putting the U.S. on track for the best year of job growth since 1999, Labor Department data show.

The unemployment rate has declined 0.9 percentage point so far this year, while the share of working-age Americans employed or looking for a job has been little changed at 62.8 percent. While hovering around the lowest level in 36 years, its stabilization may be a sign that workers are optimistic about their job prospects.

Quits Rate

That sentiment may also be evident in the quits rate, a Labor Department measure that tracks voluntary job separations initiated by the employee. Some 2.75 million people resigned in September, pushing the quits rate up to 2 percent, the highest since April 2008. That may signal workers are confident in their ability to find work elsewhere.

“We’re now, for the first time in the recovery, seeing real signs of strength,” Harris said. “The disconnect between perception and the actual economy has grown.”

While the economic outlook is starting to improve, there’s still a long way to go. The number of long-term unemployed workers as a share of all jobless Americans has declined to 30.7 percent from a high of 45.3 percent in April 2010. The current level is still higher than any period prior to the 18-month recession that ended in June 2009.

Despite strong payrolls, more than 9.1 million people remain without jobs. The number of Americans who have been out of work for 27 weeks or more tops 2.8 million -- and that is more than twice the average figure during the 20 years prior to Lehman Brothers’ September 2008 bankruptcy.

Labor Slack

“We’re still in an economy fundamentally with a lot of labor market slack,” said economist Michael Strain of the American Enterprise Institute and a former Federal Reserve Bank of New York economist. “Americans have that sense; they’re living that reality.”

The jobs report showed average hourly earnings rose to $24.66 in November from $24.57 the prior month. They were up 2.1 percent over the past 12 months.

The year-to-year readings have hovered around that level since November 2009, and compares with wage gains of 3.1 percent in the 12 months ended December 2007, when the recession began.

“Wages are a lagging indicator,” Silvia said. Similarly, “it may simply be a lag of perceptions.”

Silvia says one word explains why Americans don’t think the economy’s doing as well as it is: but.

“In the last year or two, we’ve reported the job gains, we’ve reported the unemployment rate, but it’s always ’but’ this and ’but’ that,” he said. “It may be the ‘buts’ that kept on getting into peoples’ heads about the difficulties going on.”

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To hear Republicans tell it, President Barack Obama is the leader of a lackluster economy -- and Americans believe them.The only problem: That view is outdated.Last week's Labor Department report showed the economy added 321,000 jobs in November, marking 10 consecutive...
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Sunday, 07 December 2014 09:56 AM
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