Sept. 7 (Bloomberg) -- Democrats pounded home a message of reassurance this week, promising voters a return to broad, middle-class prosperity and warning that Republicans would abandon them to a sink-or-swim future.
“I never said this journey would be easy, and I won’t promise that now,” President Barack Obama said last night as he formally accepted his party’s nomination for a second term. “Yes our road is longer -- but we travel it together. We don’t turn back. We leave no one behind. We pull each other up.”
After two weeks of dueling political rhetoric in Tampa, Florida, and Charlotte, North Carolina, today’s monthly jobs report provides a fresh test of the president’s approach. Payrolls rose less than projected in August and the unemployment rate declined as more Americans left the labor force, indicating the U.S. labor market is stagnating.
The economy added 96,000 workers last month, while the median estimate of 92 economists surveyed by Bloomberg called for a gain of 130,000. Unemployment unexpectedly fell to 8.1 percent, and hourly earnings were unchanged.
Employment was the cloud that hung over Democrats as they attended sober panel discussions, partied and renewed their enthusiasm for Obama, 2008’s icon of “hope and change.” As Republicans reminded them, the jobless rate has held above 8 percent for 43 months. No president since Franklin Roosevelt has been re-elected with unemployment above 7.4 percent.
Obama last night repackaged familiar administration policies into what he called a “real achievable plan that will lead to new jobs, more opportunity and rebuild this economy on a stronger foundation.”
Republicans countered that voters should doubt his ability to deliver.
“Over the last four years, the president has said that he was going to create jobs for the American people and that hasn’t happened,” said the party’s presidential nominee Mitt Romney. “He said he would cut the deficit in half and that hasn’t happened. He said that incomes would rise, and instead incomes have gone down.”
Evidence of the economy’s sluggish state comes from the Federal Reserve. The nation’s central bank has promised to keep interest rates near zero through the end of 2014.
Such extraordinary low rates mean weak economic growth, with unemployment potentially remaining as high as 7.7 percent two years from now, according to the Fed’s latest forecast.
“We have seen no net improvement in the unemployment rate since January,” Fed Chairman Ben S. Bernanke said in an Aug. 31 speech in Jackson Hole, Wyoming. “Unless the economy begins to grow more quickly than it has recently, the unemployment rate is likely to remain far above levels consistent with maximum employment for some time.”
If the frequent assertions by Democrats that Obama has the economy moving in the right direction verged on defensive, some party strategists think the Republicans are overplaying their hand in criticizing the administration.
“Republicans have built their entire narrative around the economy being worse than four years ago, and it’s just factually wrong,” said Simon Rosenberg, president of New Democratic Network, a Washington-based research and advocacy group, at an event sponsored by The Hill newspaper.
The still-poor jobs market has improved on Obama’s watch. In January 2009, the economy lost 818,000 jobs and another 724,000 Americans became jobless the following month.
So far this year, employers have created an average of 139,250 jobs a month.
The unemployment rate peaked nine months into Obama’s presidency at 10 percent. Though the economy, growing at an annual rate of 1.7 percent in the second quarter, remains subpar, showing progress will be sufficient for voters, Democrats say.
To help make their case, Democrats deployed former President Bill Clinton, who presided over the creation of 21 million jobs in the 1990s, as a sort of economic character witness for Obama.
Clinton employed the language of the workplace to argue Obama’s case. “He has laid the foundations for a new, modern, successful economy of shared prosperity,” he told delegates on Sept. 5. “And if you will renew the president’s contract, you will feel it. You will feel it.”
Democrats offered voters what Obama described as “a choice between two different paths for America.” Clinton said voters could choose between “shared prosperity” and the “you’re-on-your-own” world he said the Republicans were peddling.
It’s also a choice, he said, between continuing along a difficult, though ultimately rewarding road, or returning to a set of policies the Democrats blame for the 2008 crisis.
The Democrats embraced government spending on education, worker training and infrastructure that Republicans deride as wasteful. With echoes of the “bridge to the 21st century” that he promised during an earlier time of transition, Clinton said government must prepare Americans for a reshaped economy that will barely resemble the credit-fueled enterprise that went into a tailspin in 2008.
“The old economy is not coming back,” he told delegates. “We’ve got to build a new one.”
While Democrats talk of building an economy rich with exports and manufacturing, they recognize the jobless rate is an electoral vulnerability.
“What’s tough is the jobs picture,” Governor John Hickenlooper of Colorado said in an interview with Bloomberg. “A lot of those jobs we’ve lost because of outsourcing and technological change; they’re not coming back.”
North Carolina, host to this week’s convention, underscores the threat. Obama won the state, where vacant textile mills bear witness to the scars of economic change, by just 14,000 votes in 2008 and the jobless rate is 9.6 percent, more than a percentage point above the national average.
White House Communications Director Dan Pfeiffer played down the importance of today’s jobs report, calling it “one of an array of factors” reflecting the economy’s performance, adding that the number was “more focused on in Washington than by the average American.”
The Democrats’ electoral case involved a defense of the unpopular tools Obama used to rescue the economy in 2009, an assertion that a full-scale economic reconstruction is under way, and a full-throated defense of his values.
Austan Goolsbee, former head of the White House Council of Economic Advisers, was among those this week defending the stimulus program, which the Congressional Budget Office estimates cost $821 billion.
“It wasn’t enough to overcome the worst downturn of all time,” he told a Politico panel. “But it would have been a hell of a lot worse if there hadn’t been a stimulus.”
The budget office calculated that the stimulus raised employment in the fourth quarter of 2011 by 300,000 to 2 million.
In a February survey of leading economists by the University of Chicago Booth School of Business, 93 percent said unemployment at the end of 2010 was lower because of the stimulus. By a margin of 60 percent to 14 percent, they agreed the program’s benefits would exceed the costs; 26 percent weren’t sure.
The Democrats also took steps to deflect Republican charges that the president is hostile to free enterprise, showcasing the co-founder and former chief executive of Costco Wholesale Corp., a familiar locale for the suburban voters coveted by both parties.
Jim Sinegal, who has contributed $39,400 to Democratic candidates this year, told delegates: “Business needs a president who has covered the backs of businesses. A president who understands what the private sector needs to succeed. A president who takes the long view and makes the tough decisions.”
Costco has flourished on Obama’s watch, adding about 17,000 new jobs and witnessing its stock price rising 112 percent.
Led by Clinton, the Democrats also took a swipe at the Republicans for blocking Obama initiatives that might have created more jobs.
The $447 billion jobs plan Obama proposed last September would have cut the payroll tax for workers in half, reduced taxes for small businesses, expanded infrastructure spending on roads, bridges and school refurbishing, and provided assistance to state and local governments to avoid layoffs of teachers, police officers and firefighters.
Congress extended an expiring 2 percentage-point payroll tax cut, though not the full 3.1 percentage-point cut Obama had requested. Most of the rest of the provisions were blocked by congressional Republicans.
Had the entire package been passed, 1.9 million new jobs would have been created by the end of 2012, estimated Mark Zandi, chief economist of Moody’s Analytics Inc. Another forecasting firm, Macroeconomic Advisers, projected the full package would have created 1.3 million jobs.
Republicans said the Democratic arguments missed their mark. “They go so over the top in their criticisms, it’s almost a caricature,” said Tony Fratto, a former spokesman for President George W. Bush. “A Republican future -- it’s not Bleak House.”
While Obama hopes to benefit from Clinton’s economic seal of approval, he can’t expect to rerun the Clinton boom, when the economy expanded at an average annual rate of 3.9 percent.
Neither the Federal Reserve nor Wall Street forecasters anticipate anything close to that performance in the next few years, meaning unemployment will likely remain elevated.
The economy will grow at an annual rate of 2.1 percent next year and 2.8 percent in 2014, according to economists surveyed by Bloomberg.
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