The White House should be happy about the excellent employment report, but the president still faces a stacked economic deck.
Friday's report that the U.S. economy added 200,000 jobs in December confirms that President Obama has a story to tell about the economy as he runs for re-election. But make no mistake: Unless job creation speeds up even more in the months ahead, and the U.S. recovery avoids the land mines strewn across the global economy, it won't be a great story.
Momentum matters a lot in politics, and on the economy, Obama has some. The private sector added nearly 2 million jobs in 2011, Friday's numbers show. The public sector lost 300,000 jobs on the year, but even accounting for that, the U.S. economy added more jobs on net than any year since 2006.
Most importantly, the recovery appears to have successfully weathered several external shocks, including an oil price spike, the Japanese tsunami, Washington brinksmanship over raising the federal debt limit, and the ongoing crisis in the Euro zone.
Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote Friday morning that the Labor Department report confirms sustainable hiring trends across the private sector, thanks to sustained consumer spending and easing credit conditions. "This is the real deal for the U.S. economy," he wrote, adding: "the key point is that job growth is accelerating, and there is more to come."
Obama needs Shepherdson to be right. Growth remains more tortoise than hare, by a longshot. There are still 13 million Americans out of work. The unemployment rate, even with its recent drops, is an ugly 8.5 percent. As Heidi Shierholz, an economist at the liberal Economic Policy Institute, noted Friday, "at December's growth rate, it would still take about seven more years -- until around 2019 -- to fill the gap and get back to the pre-recession unemployment rate."
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Plenty of economists expect even that modest pace to slow in the coming months. "We don't expect December's rate of job growth to last, and would note that the prevailing trend (roughly +140,000/month on 3-, 6- and 12-month horizons) is a sluggish recovery relative to the depth of the preceding recession," Alan Levenson, chief economist with T. Rowe Price Associates, wrote on Friday.
More potential shocks to the recovery loom in 2012 than did a year ago. Europe's ailing banks and debt-strapped sovereigns could blow a hole in the global economy at any time and push America back into recession. A showdown between Iran and the West over nuclear weapons development could send oil prices through the roof. Congress remains ... Congress.
And yet: The trend line is clear and unmistakable. The U.S. economy is improving, slowly but surely. Obama's re-election prospects would seem to be, as well. He has a story to counter the Republican narrative that the president wrecked the economy. "It's not nearly as bad as they say it is" isn't a fantastic argument, but it's an argument, nonetheless.
Image: Calculated Risk
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