Obama looks on bright side of ugly jobs picture

For President Barack Obama, there is no good way to frame the jobs message.

Tell it like it is and it could demoralize already glum consumers who might curb spending just when the economy needs a boost. Sugarcoat the outlook and you risk paying the price at the polls if the employment picture does not improve.

Tucked inside Obama’s 451-page economic report to Congress this month was this grim reality: Millions of people will be unemployed for years to come.

Obama has stuck to the tried-and-true political practice of accentuating the positive. Rather than talk about gloomy prospects, he highlights policy steps taken and planned and then acknowledges there is still a great deal to be done.

“We may have broken the back of the recession ... the economy may be growing again, but that growth has not nearly made up for the terrible pain and dislocations that rocked businesses and families over the course of a very difficult two years,” Obama said last week. “So we’ve got a lot of work to do.” History suggests his approach makes political sense. The next nine months will tell whether it resonates with voters.

Political analysts point to former President Jimmy Carter’s infamous “malaise” speech in 1979, when he spoke of a crisis of confidence infecting the country, as proof that it doesn’t pay for politicians to be blunt bearers of bad news.

Carter and many of his fellow Democrats in Congress were swept out of office the following year by Ronald Reagan, who campaigned on an upbeat message.

Unemployment is likely to weigh heavily in congressional elections this November when all 435 seats of the House of Representatives and more than a third of the 100 Senate seats are up for grabs.

“Unemployment is not going anywhere fast, either in 2010 or in 2011, or for that matter 2012, and that creates a very, very powerful headwind into which a president and a majority party must sail,” said William Galston, a senior fellow at the Brookings Institution who served as a policy adviser to President Bill Clinton.

No illusions

Since the start of the recession in December 2007, 8,4 million jobs have been lost. Although the White House and most private economists think payrolls are on the verge of growing, perhaps by March, it will take years to fill that hole.

Obama’s economic team reckons the economy will add an average of 100 000 jobs a month this year, and close to 200 000 a month in 2011. Even if that proves accurate, it would replace fewer than half the jobs lost during the recession.

The White House has no illusions about this. Both Obama’s report to Congress and his 192-page budget proposal assume unemployment stays high through at least 2015.

Neither document is riveting reading. It is unlikely many people plowed through them. So should Obama spell it out to the public?

The last time unemployment was as high as it is now — 9,7% and likely to move higher in the coming months as discouraged workers jump back into the labor pool — was in 1983, under President Reagan.

Like Obama, Reagan inherited a weak economy from his predecessor, who was Carter. Like Obama, Reagan had to deal with a labor market that grew worse under his watch.

Murray Weidenbaum, who was one of Reagan’s economic advisers, said when it became clear the economy was slipping back into recession in 1981, Reagan didn’t mince words.

“The next time he had some interaction with the press, he said, ‘We’re hitting recession,’” recalled Weidenbaum, who now heads the Weidenbaum Center, a non-profit research organization at Washington University in St. Louis.

“It didn’t get a lot of play, but it set the groundwork, so when it became clear we were in a recession it didn’t come as a great surprise. It sure enhanced his credibility.” When Reagan took office in January 1981, the jobless rate was 7,5%. By November 1982, when congressional elections rolled around, unemployment was 10,8% and Democrats gained 27 congressional seats.

The numbers are strikingly similar now. When Obama took office in January 2009, the jobless rate was 7,7%. Most economists think it will stay below 10,5% this time, but probably won’t come down much by November’s elections.

That reality isn’t lost on members of Congress facing frustrated voters. They are well aware that Democratic incumbents have been punished, most recently in Massachusetts where the Senate seat held by liberal standard bearer Ted Kennedy went to a Republican. Republicans also won governors’ elections in Virginia and New Jersey.

Underpromise and overdeliver

Brookings’ Galston said Obama made a big mistake in 2009 when he overpromised on what the $787 billion stimulus package could deliver. He said it would cap unemployment. It didn’t.

That made him an easy target for Republicans who argue the stimulus failed, even though economists on the left and right say it helped ward off a depression.

Galston said he would advise Obama to manage expectations and to speak move bluntly about lingering labor market pain.

“I have always believed that the American people are much more capable of being treated as mature adults than politicians give them credit for,” he said.

The best hope for Obama is that unemployment shows some improvement by November, and continues to drift down in 2011 and into the presidential election year that follows. Private economists think that is the most likely path, provided the economy doesn’t slip back into recession.

Creating jobs will not be easy. Many jobs lost in auto manufacturing, construction and real estate are not coming back. That has dealt a severe blow to blue-collar workers and union members who have traditionally been staunch Democrats.

A study by economists at Northeastern University in Boston found that unemployment had devastated the poor and under-educated, who tend to lean toward Democrats.

The jobless rate among those in the bottom 10% of household income hit 30,8%, which the researchers called a “true labor market depression.” For the richest 10%, the jobless rate was just 3,2%.

“There was no labor market recession for America’s affluent,” they wrote.