An analysis of the unemployment rate figures compiled by the United States Bureau of Labor Statistics along with an assessment of the current economic environment suggests that Barack Obama could be the only post-World War II President to suffer an unemployment rate above 8% through the duration of his administration. (See attached graph)
However, only six months ago, this grim prospect seemed unlikely. After the financial crisis of 2008, unprecedented measures, including expansion of the money supply, the Troubled Asset Relief Program and global fiscal stimulus averted an even deeper crisis. Due to promising developments in late 2009 and early 2010, economists and government officials believed the economic recovery would lead to a robust recovery with relatively strong job growth. Such optimism prompted the Obama Administration to proclaim a “Summer of Recovery.”
In April, the Federal Reserve projected 3% GDP growth for 2010, accelerating through 2012. Further, while unemployment would remain above 9% for 2010, it would drop towards 7% by 2012. An improving economy and employment picture would certainly bolster President Barack Obama’s bid for reelection in 2012.
Unfortunately, the decidedly mixed nature of recent economic data prompted downward revisions to economic projections. In June, the Federal Reserve downgraded its GDP growth projection for 2010 slightly while raising its projections for the unemployment rate above 9% in 2010, above 8% for 2011 and over 7% in 2012. (See attached Federal Reserve Economic Projections table)
Given the weaker data, private economists and Obama Administration officials
White House Budget Director Peter Orszag and Chairwoman of President Obama’s Council of Economic Advisers Christina Roemer revealed lowered expectations for a strong recovery, including an unemployment rate of 9% for 2011. Similarly, the Philadelphia Fed’s Survey of Professional Forecasters and the latest Wall Street Journal forecasting survey also predict an unemployment rate above 9% through 2011.
While the weak economy plagues the Democrat Party in the upcoming November midterm elections, a sluggish economy with lackluster job growth persisting through the 2012 Presidential election cycle looms. For historical perspective, despite unemployment rates rising above 10% in 1982 and 1983, a strong recovery propelled Ronald Reagan to a landslide reelection victory in 1984. If the economy and job creation do not rebound strongly, President Obama will likely be a one-term president with an infamous record of never enjoying unemployment below 8%.