Jobs Report a Double-Edged Sword for President

(NewsCore) - The strong January jobs report was good news for President Barack Obama's re-election prospects, but political history indicates he may need more months of improvement to build a durable defense of his economic record against Republican criticism.

The path of today's job market is starting to resemble the one that led to Ronald Reagan's resounding re-election victory in 1984. But the question for Obama is whether this year will end up looking like 1984 or 1992, when George H.W. Bush's economy was improving but not quickly enough to help him win a second White House term.

The unemployment rate dropped to 8.3 percent in January, not far from where it was at the same point in Reagan's first term, when it was eight percent. And under both Obama and Reagan, joblessness was heading down.

But the key for Reagan was that unemployment kept falling through his re-election campaign. By his first term's end, it had dropped to 7.3 percent -- below where it was when he was inaugurated. With inflation much lower, too, he was in a position to ask voters if they were better off than when he started.

Economists generally don't expect such rapid job growth this year. The Federal Reserve expects unemployment to be stuck between 8.2 percent and 8.5 percent. That would be higher than the 7.8 percent rate in January 2009, when Obama took office amid a recession and a skyrocketing jobless rate.

The job market is improving more slowly under Obama than it did under Reagan. The jobless rate has declined 1.7 percentage points since it peaked at 10 percent in November 2009 -- a period of more than two years. By January 1984, at the same point in Reagan's presidency, unemployment had dropped 2.8 percentage points from a peak of 10.8 percent -- a period of 13 months.

There are other reasons for Obama to avoid making too much of the Reagan comparison. Under Reagan, the economy enjoyed many months of superfast growth. From April 1983 until June 1984, as voters were forming opinions about Reagan's performance, the economy grew at an annual rate of more than eight percent. Rapidly falling interest rates were fueling a sharp housing recovery.

Last year, in contrast, the economy expanded a meager 1.6 percent. And the housing market remains severely impaired.

A more ominous comparison for Obama is Bush's failed re-election bid in 1992. The economy was improving during Bush's final year in office, but not enough for him to win. Economic output, for example, rose at an annual rate of more than four percent during his re-election campaign. The unemployment rate was falling by November 1992, but at 7.4 percent it was a full two percentage points higher than when Bush took office, a much weaker position than Obama's.

The good employment news complicates a key issue for Republican presidential candidates, especially former Massachusetts Gov. Mitt Romney, the front-runner who has built his campaign squarely on a critique of Obama's economic policies.

One of Romney's economic advisers, N. Gregory Mankiw, called the job increase "a very solid number," in a blog posting. "President Obama's probability of being re-elected rose by about two percentage points," wrote Mankiw, a Harvard University economist, after analyzing the immediate reaction registered on Intrade, the Irish betting site.

Romney blended his attacks on Obama with an upbeat response to the report. "We got good news this morning on job creation in January. I hope that continues," Romney said at a campaign stop in Sparks, Nev., Friday. "But this president has not helped the process. He's hurt it."

Obama heralded the news, but refrained from taking a victory lap that might smack of complacency or insensitivity to voters' economic struggles.

"These numbers will go up and down in the coming months," said Obama, speaking in Arlington, Va. "But the economy is growing stronger. The recovery is speeding up. And we've got to do everything in our power to keep it going."

Obama and his advisers, while optimistic about the jobs trend, worry that it could be reversed by either of two potential election-year events: a deepening of the debt crisis in Europe or a confrontation with Iran that would drive up oil prices