The real jobs story: How will Obama, Romney, Inslee and McKenna fare?

With another six months before elections, May jobs numbers aren't necessarily a tell-all end-all phenomenon for candidates. What to watch in the next few months to figure out the real story about the economy and elections.
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Rob McKenna

With another six months before elections, May jobs numbers aren't necessarily a tell-all end-all phenomenon for candidates. What to watch in the next few months to figure out the real story about the economy and elections.

If in politics, “it’s the economy, stupid,” then it is relatively stupid to think that the economy of May will have much bearing on the election in November. So much can and will happen between now and then to make the current state of the economy not much more than a blip on the 24-hour news cycle.

Nonetheless there is little doubt that jobs, job growth, and the relative state of unemployment are top of mind these days among voters and that the economy will once again play a pivotal role in the election this fall – in both the national presidential race and Washington's state-wide governor’s race.

The May 4 unemployment report was a good example. The relatively sluggish job growth was immediately seen as a plus for presumed Republican nominee Mitt Romney despite a drop in the unemployment rate. The dip to 8.1 percent was written off as a result of 345,000 people leaving the work force rather than new creation.

Meanwhile, Team Obama pointed to slow but steady growth in the economy — about four million jobs have been created in the past few years — yet acknowledged that there still is a long way to go on the jobs front.

The real question will be, how much job growth (or lack of it) is enough to tip the scales one way or the other? And when will we hit that tipping point? It could occur very late in the game. The Bureau of Labor Statistics will report on the employment picture for October on Nov. 2 — the Friday before the election.

For gubernatorial candidates Jay Inslee and Rob McKenna, the jobs issue might at first seem trivial to their election prospects. The Seattle area has seen a relative boom in jobs as Boeing, Amazon, Microsoft, the video game industry, and other sectors all contribute to a fairly strong economy. The unemployment rate for King County was only 6.1 percent in April; Snohomish County was at 7.1 percent. The governor, no matter the person or the party, does not really have much impact on Seattle-area jobs.

Yes, there are tax advantages given to the companies, but growth is largely driven by external factors. In Boeing’s case the labor peace worked out between management and the machinists’ union is mostly responsible for job growth, plus the need to add fuel-efficient aircraft to the world’s fleet. Amazon benefits from a continuing boom in online business and the video game industry is a legacy of Nintendo’s decision a decade ago to locate its American headquarters here. Today, gaming leaders like Microsoft's Kinect and Zynga continue that legacy. There is no state income tax here, long an attraction to entrepreneurs.  

Unfortunately, McKenna and Inslee aren't running for governor of Seattle. In the rest of the state things are less rosy. Spokane County's unemployment rate was 8.9 percent in April; Benton County was 8.4 percent and Gray's Harbor 13.2 percent. Even the more urban Pierce County was at 9.0 percent. All of this contributed to a statewide unemployment figure of 8.1 percent, which matched the national rate of 8.1 percent.

So the candidates for governor face the usual state “donut hole” issue. While most of Washington suffers through a slow recovery similar to the national picture, the Seattle area is doing quite well. South Lake Union is booming: Restaurants are filled with a young lunch-time crowd, and cranes dot the sky. At one site, more than a dozen hard hats work on a nearly-done building. Construction also continues on several other holes in the ground elsewhere in the neighborhood and on the Mercer corridor.

The historic dynamics of a Washington state election will be on stark display. Can the usual Democratic stronghold of King County provide enough votes to offset the likely Republican dominance in other counties? The wild card: Neither candidate is running as an incumbent, where a strong jobs report and strong economy – even in just one part of the state – would be a true asset.

It is not a slam dunk for either candidate. Steve Wilhelm reported recently in the Puget Sound Business Journal that “the number of people building Boeing jetliners, which has been climbing steadily, will peak this year at nearly 83,000 and start to dwindle in 2013.” The state Forecast and Revenue Council, in its latest report, said job growth in the state was beginning to slow with the growth of 3,300 jobs added in the most recent report, “the slowest in five months.”

Another factor to consider is the pace of job growth. While the job growth totals are mostly positive for the state, there remains a large overhang of unemployment. The Forecast Council noted that “employment in Washington has now been expanding for two years but this expansion has been characterized by the slowest jobs recovery in recent memory. The 91,900 jobs gained since the trough in February 2010 still make up less than half of the 207,000 jobs lost during the recession.”

In the most recent report from Employment Security (May 16) Washington actually lost 300 jobs from March to April 2012 with the private sector adding 2,000 jobs over the month, and the public sector losing an estimated 2,300 jobs. A reversal of this short-run downturn — or even continued job growth confined to the Seattle area — would be a positive for Inslee, allowing him to position himself as a Democrat who would continue the growth.

At both local and national levels, government job losses have been a strong drag on economic growth. Government statistics show that about 600,000 jobs in state and local governments have been lost since 2009. The Wall Street Journal estimated that the unemployment rate would be about 7.1 percent without government job cuts.

McKenna could still cast doubt on Inslee's positioning, pointing to the fact that Washington is still far from recovering the jobs lost in the recession, and casting himself as the candidate who could return the state to full employment. 

The pace of job growth will be key in the national election too, though Obama's team has been largely quiet on the specifics of the issue. After the May report came out, one Obama administration official declined to specify a target for job growth, saying she was not an economist and did not want to speculate on a number.

So what would be a good number from the Obama view? Probably an average of about 175,000 new jobs a month. The Federal Reserve Bank of Atlanta has a nifty little calculator that figures out the number of jobs needed to produce a desired unemployment rate. To get to an electable 7.8 percent by the November election (that's less than six months from now) we would need to add 176,862 jobs a month. Reducing the unemployment rate to 7.5 percent would require a steep 250,000 jobs a month.

Just holding national unemployment at the current 8.1 percent would require 104,000 new jobs a month, which would put Romney in a comparatively strong position.

The New York Times is also following the unemployment rate closely, tracking unemployment rates and job growth on a regular basis through its Economix blog. Using Moody’s Analytics, the latest report has some good news for Obama, projecting an average job growth of 183,000 and expected unemployment at 7.9 percent in October.

Still, there are plenty of economic uncertainties ahead that will impact elections. Here are just a few:

  • “The U.S. economy has been sending mixed signals, with recent weak employment and GDP growth but also higher disposable personal income, strong auto sales, and signs that the housing market may be stabilizing,” according to the state Forecast Council.
  • As of May 22, the Organization for Economic Cooperation and Development, the Paris-based organization that tracks industrial economies, lowered its forecast for GDP growth across countries like the U.S, Canada, most of Europe, South Korea, Australia, Chile, and others. The organization's expectations dropped from an annual rate of 1.8 percent in 2011 to 1.6 percent in 2012. Still, the OECD does expect growth to bounce back a bit, rising to about 2.2 percent in 2013, according to its latest Economic Outlook. “The global economy is gradually gaining momentum, but the recovery is fragile, extremely uneven across different regions and could be derailed by the crisis in the euro area,” it said in the report.
  • In China, one of the engines of the world economy, GDP is dropping. In the first quarter it fell to 8.1 percent from its fourth quarter report of 8.9 percent; a sharp contrast with its overall rate of 9.2 percent in 2011. 
  • Consumer confidence is a bit stronger, according to the University of Michigan survey of consumer sentiment. That’s a plus since consumer spending makes up about two thirds of the economy.
  • Manufacturing employment in Washington State is strong. This is a good sign since these jobs are usually primary jobs, often leading to other jobs in the service sector of the economy. 

The next unemployment rate/new jobs report will come out Friday, June 1. So prepare for another round of spin from both camps, depending on the numbers. Several key economic forecasters, by the way, are already seeing a stronger report for May – right around that 175,000 job average. Meanwhile, Washington continues to outperform the national economy by a narrow margin, though high gas prices on the West Coast could still have an impact here. Stay tuned.


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About the Authors & Contributors

Stephen H. Dunphy

Stephen H. Dunphy

Stephen H. Dunphy writes on business and economic issues for Crosscut. He was a business editor and columnist for a number of years at The Seattle Times.