For the past two years, there has been a pattern to the country’s job growth: the economy speeds up in the winter, cruises through the spring, and slows down as summer approaches. For 2012, it seems that we’re on track for the same ride. The strong gains of January and February gave way to the moderate gains of March and April, which have completely dissipated with the latest jobs report. In May, the economy created 69,000 jobs, and unemployment rose slightly to 8.2 percent.
This bleak picture becomes much worse when you include revisions. The Bureau of Labor Statistics revised March job growth from 154,000 to 143,000, and April growth from 115,000 to 77,000. Altogether then, the economy grew by a scant 20,000 jobs in May. On Twitter yesterday, New York Times writer David Leonhardt said that it would be “disappointing” to see job growth below 150,000. This jobs report is beyond disappointing—it’s a disaster.
Obviously, this has political implications, and none of them are good for Barack Obama. In the short term, this gives the Romney team an excellent talking point and bolsters their depressingly effective message of facts (the economy is sluggish) and falsehoods (Obama hasn’t created a single job). Obama can recover from this, but only if summer sees a significant improvement in the employment situation. Right now, Obama is the slight favorite in this election. If this continues to the fall, he’ll almost certainly be the underdog.
The frustrating thing about all of this is that it isn’t a hard problem to solve. There are tools in both monetary and fiscal policy to increase aggregate demand, and boost the economy. A higher inflation target, another round of quantitative easing, and another round of stimulus would go a long way in improving the situation. But, unfortunately, our dysfunctional politics make the latter impossible, and Obama’s (terrible) decision to reappoint Ben Bernanke to the federal reserve makes the former unlikely. We know how to fix persistently high unemployment, but with short-sighted elites and broken institutions, it’s not going to happen.