A surprisingly sharp drop in US unemployment helped President Barack Obama’s odds of re-election regain half the ground lost in his debate with challenger Mitt Romney on Wednesday. They now stand at about 70 per cent, according to Intrade. But behind the statistical noise, the reality is more of the same — a steady but uninspiring recovery.
The jobless rate fell 0.3 percentage point to 7.8 per cent in September. Friday’s report was well timed for Obama with the election almost exactly a month away — so much so that Jack Welch, the former General Electric chief executive, took to Twitter to suggest very improbably that the White House had somehow changed the numbers. More likely, it’s a blip. Elsewhere in the jobs report, nonfarm employment increased by 114,000 in September and upward adjustments were made to the previous two months. Overall, the United States has added an average of 146,000 jobs each month in 2012 compared with 153,000 in 2011.
That’s consistent growth, but not fast enough to remove unemployment from the national conversation any time soon. In the year to September, the jobless rate declined by 0.1 percentage point a month on average. A continuation of that trend would bring a 6 per cent unemployment rate — something close to full employment — by March 2014.
However, aside from the fact that last month’s number may have been an outlier, the rate is flattered by a low labor participation rate. The ratio of employment to population has increased only to 58.7 per cent from 58.4 per cent in the past year. At that rate, it would take 14 years to reach the healthier 2007 level of 63 per cent. The number of jobs created in 2011 and 2012 also is insufficient to keep up with the expansion of the workforce due to population growth.
The Federal Reserve’s bond-buying effort, upped by $40 billion a month in the middle of September, is supposed to improve the environment for job creation. Even if it is helping a bit, it seemingly isn’t making a huge difference. Having swollen the central bank’s balance sheet to $2.8 trillion and counting, this so-called quantitative easing is looking expensive.
The next US president will have the chance to replace Fed Chairman Ben Bernanke if he doesn’t approve. But the bigger jobs question won’t go away so easily. For either Obama or Romney, it looks likely to be on the agenda for years.