Tuesday, April 20, 2010

What Color Is Your Petard?

You may recall that during the 2004 presidential campaign there was a lot of discussion about the economy. Despite the fact that nearly all economic indicators were trending positive, the Democrats--lead by John Kerry--continuously harped on the theme that it was a "jobless recovery" and that as president George W. Bush had lost more jobs than Herbert Hoover. And it was indeed true that the job market markedly lagged the rest of the economy in rebounding from the 2000-01 recession. Eventually, jobs did come back, enough so that by the time the 2004 election actually took place, the Democrats could no longer get much play out of the issue. (In June 2003, the unemployment rate topped out at 6.3%, by November of 2004, it was at 5.4%)

So it's somewhat ironic--in a delicious way--to think that Democrats may be faced to make the opposite side of the jobless recovery argument this time around. By most indications, it's becoming increasingly clear that some sort of economic recovery is afoot. The strength and eventual staying power of said recovery is open to debate, but even the dismalist of the dismal scientists have to admit it's getting better.

But this recovery also appears to be one wherein job creation doesn't really begin until significantly after the recovery is well underway. In fact this time around, it may take even longer to make a dent in the unemployment numbers. While companies are beginning to see the light, most are still playing it safe and waiting to add to their payrolls. And while some industries can bring workers back fairly quickly once they decide to begin hiring, in many others the cycle time from a firm's leaders giving the thumbs up to adding headcount to a new worker actually starting a job can be lengthy.

From an anecdotal perspective, the company that I toil for is seeing a nice bounce back in sales, especially in Asia and the United States. It's actually come sooner than we had expected and the outlook for the rest of the year is far more positive than most would have imagined just six months ago. However, there's no rush to bring bodies back in to the organization just yet. The stresses on our the leaner and meaner work force are apparent, but the hiring spigot is going to be opened slowly and with careful calibration. I would imagine this is also what is happening in other companies throughout America.

So even if the economic recovery continues, it's probably not going to happen soon or be strong enough to really turn the tables before November when it comes to jobs. And when it comes to jobs, perception is reality. Even if the unemployment rate drops significantly between now and November, if people don't feel like there's a boom in jobs, they won't believe it. If their unemployed friends still can't jobs and if their relatives who just graduated from college can't find meaningful work, they will have a negative impression of the state of the economy. It's going to be fun to watch Democrats tout GDP numbers as proof of the strong economic recovery, while they dismissed the exact same figures as meaningless in the lives of "real" people back in 2004.

But what's even more likely is that the economy will not be the X factor in the 2010 elections. While economic health is often what tips the political balance for or against the party in power, it doesn't always hold trump. In November of 1994, the economy was booming and unemployment was at 5.6%. That didn't prevent the Gingrich Revolution. In November 2006, the economy was in great shape with unemployment at 4.5%, but voter frustration with the war in Iraq and the perceived Culture of Corruption in Congress didn't save the GOP. 2010 seem likely to be another year where it isn't the economy, stupid.

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