O has steep hill to climb
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President Obama’s chances of winning re-election deteriorated significantly this week. But it wasn’t just yesterday’s jobs report that hurt him.
As you already know, the Labor Department announced yesterday that just 69,000 jobs were created in May, when the unemployment rate rose to 8.2 percent.
Experts had been expecting 150,000, a figure that would have been just enough to keep pace with the number of new people trying to enter the workforce.
And if it hadn’t been for generous assumptions on Labor’s part, the May headline figure would very likely have been negative.
For instance, Labor assumed that 204,000 jobs were created by newly formed businesses last month — job growth that the government can’t actually prove occurred.
Worse, the government lowered the previous estimates of job gains in March and April, two months that also had generous guesses on the amount of hiring by newly formed companies.
March and April’s job gains were already disappointing. Now they are more so.
Traders on Wall Street didn’t even have to go into the nuances of the report to see that it was ugly. Stock prices dropped sharply right away and stayed that way.
A declining stock market alone is enough to get an incumbent president kicked out of his job — and the Standard & Poor’s 500 is now down 9.3 percent in the second quarter and nearly flat for the year.
But, as I said in my first paragraph, the President’s chances of winning re-election already dimmed earlier this week because of another report — the figures on real disposable income that were released as part of the gross domestic product report.
The GDP report showed that over the past year the growth in the nation’s real disposable income — that’s how much you make after inflation — had been revised down to just 0.20 percent from 0.58 percent.
“Since the first publication of annual disposable income data in 1929, no incumbent party has retained the White House when real disposable income growth has been below 3 percent in a presidential election year,” says John Williams, an economist who runs ShadowStats.com.
There’s virtually no chance for real disposable income growth to reach 3 percent this year, even if the economy suddenly booms. And the job figures should look even worse this summer.
A brief history lesson:
* Jimmy Carter was kicked out of office in 1980 when real disposable income grew 0.96 percent — which is more than four times better than it is now.
* And Obama beat John McCain in 2008 when real disposable income growth was, by today’s standard, a relatively strong 2.42 percent.
A lot of things go into a presidential election. But despite what many nitwits were saying earlier this year when a couple of statistically flawed reports made it look like the economy was getting better, Americans vote their wallets.
It’s been a while since I predicted that President Obama would lose his re-election bid. Like him or not, I think the chances of that happening are getting better and better.