After a disastrous first quarter for economic growth things finally appeared to be turning the corner. Jobs growth appeared to be accelerating, earnings were slowly rising and the ranks of the long-term unemployed appeared to be thinning. All told, an average of 212,000 jobs were added over the previous 12 months, slightly above the level needed to keep up with normal population growth. It wasn’t great, but it was a start.
That’s not to say that everything was rosy. In late August the Congressional Budget Office forecasted that the economy would grow by a meager 1.5 percent in 2014, a figure largely weighed down by the fact that the economy contracted by an annual rate of 2.1 percent in the first quarter. Moreover, the CBO said the depressed growth wasn’t merely a temporary problem. Joseph Lawler reported for the Washington Examiner:
The economy‘s best days are behind it, according to Congress’ budget crunchers.
The Congressional Budget Office is now creating its budget projections using the assumption that the economy will never grow as fast as it did in the years before the recession.
The CBO updated its fiscal projections Wednesday, and they reflected its new gloomy view that the future of the U.S. economy is one of slower growth and lower productivity.
“They think that we will get back up to potential growth,” said Loren Adler, an analyst at the Committee for a Responsible Federal Budget, “but they make it clear that they think potential growth is lower than it used to be in the ‘80s and ‘90s.”
And then in September the Congressional Budget Office was back with more bad news. The report confirmed that “a significant amount of slack remains” in the U.S. labor market and that “the shortfall in labor participation and the elevated unemployment rate have resulted in substantially lower employment in 2014 than would otherwise be the case.”
Despite those troubling trends economists were still generally pleased with the economy’s progress and predicted that payrolls would increase by 225,000 in August. Then reality set in. Former CBO Director Douglas Holtz-Eakin writes:
Taken at face value, the August jobs report was a disaster. The economy created only 142,000 jobs, and job growth was less widely dispersed than in the previous months. The alternative measure of jobs – from the household survey – showed a complete stall of 16,000 jobs.
Yes, the unemployment rate fell from 6.2 percent to 6.1 percent, but only because the labor force participation rate fell by 0.1 percent. The Hispanic unemployment rate declined from 7.8 percent to 7.5 percent. Optimists may point to a decline in the long-term unemployed, but this may simply represent the weary giving up entirely.
The sagging jobs number mirrors the plunging optimism that Americans have about the economy. Here’s the Washington Post’s Aaron Blake explaining the pessimistic state of the nation:
A new poll Thursday from the Pew Research Center shows optimism about the economy is actually lower than at any point since the recession hit in late 2008. Just 22 percent of Americans think things will be better a year from now — the lowest that measure has been since 2008.
That’s the same percentage as those that say things will get worse, so it’s not like more people think we’re headed for a double-dip recession. But even as there have been six straight months of job creation (prior to Friday), the American people don’t yet see a long-term trend forming.
This isn’t the type of data that Democrats were looking for. They need higher economic growth, more jobs, and a return to optimism for the economy to turn into a positive issue for them in November. Unfortunately, this isn’t a problem with messaging, it’s an issue of policy. And so long as Democrats continue to espouse big-government, anti-market positions neither the economy nor their political position will improve.