Click to enlarge (Source: CBO)
The Congressional Budget Office released its economic and budget forecast for the next decade Wednesday morning. And by the number crunchers’ best estimates, the national unemployment rate will be 8.2 percent around the time voters head to the ballot box at the end of 2012. That’s pretty high. And it’s above a symbolically significant benchmark: Whichever Republican is running against Obama will surely harp on the prediction from then president-elect Obama’s transition team in January of 2009 that passing the stimulus would prevent the jobless rate from ever reaching 8 percent. (They now argue no one yet knew the full depth of the recession.)
But for as much emphasis is put on what the unemployment numbers are at any given time, it’s an incomplete picture. Take the current situation: There have been some flutterings of optimism of late and President Obama’s approval ratings are clawing back near 50 percent, but the labor market is still in shambles. Things are bad, albeit slowly getting better. Of course there are plenty of variables, but, in general, we know that people like their president more when they feel the economy is improving; the faster the better. So one thing worth examining is if and how things will be improving when the next presidential election enters the stretch run. From the CBO’s summary:
As the recovery continues, the economy will add roughly 2.5 million jobs per year over the 2011–2016 period, CBO estimates. However, even with significant increases in the number of jobs, a substantial reduction in the unemployment rate will take some time. CBO projects that the unemployment rate will gradually fall in the near term, to 9.2 percent in the fourth quarter of 2011, 8.2 percent in the fourth quarter of 2012, and 7.4 percent at the end of 2013. Only by 2016, in CBO’s forecast, does it reach 5.3 percent, close to the agency’s estimate of the natural rate of unemployment (the rate of unemployment arising from all sources except fluctuations in aggregate demand, which CBO now estimates to be 5.2 percent).
And here are some numbers pulled out from the full report:
Fourth Quarter Unemployment Rate (Projected)
Calendar Year Average Unemployment Rate (Projected)
Those projections suggest reductions in the unemployment rate will continue to inch along for the next year — dropping 0.4% by the end of 2011 with an average just 0.2% less than this year’s — but things will begin to pick up as the recovery kicks into gear. The rate would a full point lower in 2012. Things will be still be bad, but improving faster as the general election hits its stride. As Crowley (who’s been all over this subject by the way), noted a while back:
Matt Dowd, a former pollster for George W. Bush, writes that Obama will need the unemployment rate to drop by about one point–to 8.4 percent–if he’s going to win re-election.
Winning re-election with an unemployment rate above 8 percent wouldn’t be a cakewalk, and there are, of course, plenty of other considerations. And the CBO’s numbers are, of course, educated guesses. But Obama’s political team, like the American worker, can probably see some green shoots.