Jobs Key to 2012 Election

Popular Economics Weekly

We know what will win or lose the 2012 Presidential election—jobs. Will enough jobs be created to give Obama a second term? Or, will enough independent voters change horses (to elephants) and become Republicans, because not enough jobs were created? The polls aren’t clear on this. The Pollster Gallup, for one, believes that Obama will be reelected if current job creation trends continue.

For starters, Gallup believes March’s unemployment rate will decline to a seasonally adjusted 8.1 percent. Gallup’s Job Creation Index reported that March’s four-percentage-point increase is the largest one-month jump in the index that Gallup has recorded since instituting the measure in 2008..

Graph: Econoday

The monthly ADP private payroll survey is also just out, which closely tracks the BLS unemployment survey out tomorrow, also shows strength with some 209,000 jobs created in March. And ADP revised February upward from 216,000 to 230,000, so March’s number may be low. Economists’ consensus for the Labor Department’s employment report is that up to 230,000 public and private payroll jobs were created in March, and the unemployment rate will drop from 8.3 to 8.2 percent.

Graph: Econoday

There are still questions whether overall economic growth can top last year, which had bottomed out for the second time in Q1 2011, but has risen steadily since then. For its final estimate, the Commerce Department kept fourth quarter GDP growth at 3.0 percent, matching the second estimate for the overall number.  The latest quarter was stronger than the 1.8 percent rise in the third quarter.

Economists are now saying that we might see slightly higher average growth in 2012—maybe averaging 2.5 percent. Europe, which absorbs some 25 percent of U.S. imports is the main reason for uncertainty. Another worry is domestic wages and salaries, which have been rising approximately 1 percent annually after inflation of late, but isn’t enough for robust growth. Households lost some 6 percent of incomes from 2000-08, so they have a lot to make up.

Graph: Econoday

Personal spending seems to be also increasing along with GDP growth, particularly retail sales. Spending on all items is up 4 percent annually.

Graph: Econoday

Very good news was that both the industrial and service sector economies have been expanding for 27 months. This will also give a boost to GDP growth this year, with its employment index near the post-recession high, another reason to be optimistic about job creation this year.

Harlan Green © 2012