On the Washington Post’s front page today:
Unemployment is set to remain higher for longer than previously thought, according to new projections from the Federal Reserve that would mean more than 10 million Americans remain jobless through the 2012 elections — even as a separate report shows corporate profits reaching their highest levels ever.
Top Federal Reserve officials project that the unemployment rate, now 9.6 percent, will fall only to about 9 percent at the end of 2011 and about 8 percent when the next presidential election arrives, in late 2012. The central bankers had envisioned a more rapid decline in joblessness in their previous forecasts, prepared in June.
If unemployment really is 8 percent or higher on Election Day 2012, then President Obama’s reelection chances are toast. Oh, I suppose the GOP could nominate a terrible nominee, or there could be some giant last-minute factor like a terror attack, but a president who presides over four years of exceptionally high unemployment in his first term won’t get a second term. What’s more, a long, sustained period of economic misery like that might discredit Obamanomics in the public’s mind for a long, long time.
UPDATE: A reader who follows economic issues more closely than I do spotlights some more interesting information directly from the FOMC minutes that came out yesterday:
“Participants variously noted a number of factors that were restraining growth, including low levels of household and business confidence, concerns about the durability of the economic recovery, continuing uncertainty about the future tax and regulatory environment, still-weak financial conditions of some households and small businesses, the depressed housing market, and waning fiscal stimulus.”
. . . and there’s this little nugget: “Participants agreed that progress in reducing unemployment was disappointing; indeed, several noted that the recent rate of output growth, if continued, would more likely be associated with an increase than a decrease in the unemployment rate. Participants again discussed the extent to which employment was being held down, and the unemployment rate boosted, by structural factors such as mismatches between the skills of the workers who had lost their jobs and the skills needed in the sectors of the economy with vacancies, the inability of the unemployed to relocate because their homes were worth less than the principal they owed on their mortgages, and the effects of extended unemployment benefits on the duration of unemployed workers’ search for a new job.“
It’s almost as if we have the wrong policies in place or something.