It's been almost two years since Obama was elected, and payrolls are still dropping. The economy lost 95,000 jobs in September, and unemployment stayed at 9.6% only because we're losing workers from the workforce; people who don't think that they can find a job are simply dropping out. Even though I was worried about a hard crash, I find it hard to believe that almost halfway through Obama's first term, we're still losing jobs.
I say this not to imply that Obama is the reason employment is still falling; I don't think the president has that much power over the economy. Rather, it's an assessment of the magnitude of the challenge that our economy faced when he took office. Unemployment got steadily worse for three years during the Great Depression, and if things aren't quite that bad now, the lengthy decline is a reminder that recessions induced by financial crises are particularly severe.
I do wonder what happens to Obama's presidency if things don't turn around for another year. If employment finally starts to perk up in late 2011, will voters forgive him? They forgave Reagan, of course. But as you can see below, while Reagan's peak was high, it fell very rapidly as Volcker released his iron grip on the money supply. Even if payrolls start to recover, it's doubtful that it will happen very quickly. That means he might well be facing re-election with unemployment over 8 percent--even over 9 percent. Even if things have finally started to get better, after three years of stagnation, will voters trust the recovery?
I said well before the crisis that I couldn't see why anyone wanted to be president this cycle: the likelihood of a recession was too high, the fiscal conditions of Social Security and Medicare were becoming really problematic, and whoever got elected was all too likely to be unfairly blamed for these problems. As of now, Obama's poll numbers seem to be confirming this hypothesis.