Unemployment rate: How low can it go by Election Day? Under 8 percent?
Though the unemployment rate dipped to 8.5 percent last month, it remains uncomfortably high for a president seeking reelection. Economists crunch the numbers to see if it's possible for unemployment to dip to 8 percent by Election Day.
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Adding about 90,000 new jobs a month would keep the unemployment rate at 8.5 percent. To reduce the rate to 8 percent, Brusca calculates, the economy would need to create 2,057,000 jobs between now and Election Day, or an average monthly rate of 260,000. And that's just what it’s been doing for the past five months.Skip to next paragraph
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The big unknown, says Brusca, is how much the labor force will grow during that time. Like other economists, he’s not sure why fewer people are in the workforce. Is it because wages have been flat and people don’t see it as worthwhile to search for work? Is it baby boomers slipping off into retirement?
A drop in immigration may be part of the explanation, says Zandi. He observes, too, that the largest decline in workforce participation is among white female college graduates. Some reports indicate that they have stopped looking for work and returned for additional education.
Labor Department surveys show 2 million more people than in 2007 indicate that they want to work, says Zandi. “You would think they would start stepping back into the labor force,” he says. “That’s why it will be tough to get below 8 percent by Election Day."
The Moody’s economist says the issue will be moot if Congress does not extend the payroll tax holiday past February and, likewise, extend unemployment benefits. If Congress does not act, it will cost the economy 600,000 jobs, calculates Rep. Chris Van Hollen (D) of Maryland.
That figure is about right, says Zandi, because the payroll tax holiday and extended unemployment insurance add about $175 billion to the economy, or 1 percent of gross domestic product. “You could not pass it and take a chance [that] everything works out OK, but I think that would be a mistake,” he says.
“If Europe becomes a bigger problem, the cost to the taxpayers will be more than $175 billion,” he says.
If the unemployment rate dips below 8 percent, would that blunt the Republican attack?
Probably not. On Friday, Speaker Boehner, in subsequent analysis, noted that the unemployment rate averaged 9 percent in 2011, and he said that 600,000 jobs were lost since the $787 billion economic stimulus was enacted in the spring of 2009.
That may be why, in his radio address, Obama characterized this as "a make or break moment for the middle class." It may be one for his reelection bid, as well. "We've got to keep at it. We've got to keep creating jobs," he said.
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