How significant gains in the job market resulting from second round stimulus spending and pent up unprecedented productivity gains could tilt the November elections to the blue side.
"Various indicators such as the low level of employment relative to production and sales, the extraordinarily high level of productivity growth, the very high levels of free cash flow relative to sales, the low levels of inventory relative to sales, the strong recovery of the corporate bond market, and various other indicators strongly suggest that the US economy could experience a case of “Okun’s Revenge” in 2010 in which employment growth in the next few quarters rebounds much faster than the rate of GDP growth would normally imply." - Emerging markets and banking analyst, James Kostohryz
Many pundits and news organizations have theorized that the bad economy now belongs to the President and the Democratic party. Meanwhile, a Gallup poll released recently says 49% of Americans still blame George Bush for the recession.
While most people tend to have political amnesia, in this case it's obvious most Americans aren't forgetting that the economy teetered at its worst point after Lehman Brothers collapsed, during George Bush's lame duck days as President.
While it has been said by many that the Obama stimulus bill was weak because it spread out the stimulus over two years, it is starting to become quite apparent that economist predictions about its most significant effects being felt in 2010 were correct, and it might end up being better for the jobs market than having had a big punch in 2009 could have.
While the delay in some spending was bad news for most Americans that have already been hurting for months and even years, there's a lot of good in having had the recovery take shape in the way that it has.
It is only the 4th month in the year and the jobs market has started to gain traction all on its own addding 162,000 jobs in March. One third of the jobs added to the economy were census jobs, yes, but the two thirds that were added were real jobs added by the private sector.
Clearly, the trend here has finally turned a corner. It's not as if government jobs weren't aiding the labor recovery until the census began. They've been helping the recovery the whole time.
There is an expectation that most of the stimulus cash is gone already, but the reality is that a lot of money that was set for 'shovel ready' projects was actually intended for projects that weren't exactly as shovel ready as initially advertised. Many of those projects don't even break ground until later this year.
Just think, there's still about 40% of the almost eight hundred billion in the stimulus bill left. If we went from losing 750,000 jobs a month to gaining 162,000 in the first installment of the stimulus bill, there is a great possibility that the amount of jobs created by the bill will crescendo during its second big installment.
It of course is possible that the economy could lose jobs again in April like it did after the one month of job growth late last year, but the trends don't support this idea. Progressively lower numbers of long term unemployed and new unemployment requests mean people are finding jobs, and there has been no significant disruption in this trend.
We do know that census jobs will increase and so will government funded road construction jobs. New housing construction mostly happens during the summer just like road construction, so even with a retarded housing market, jobs will come back for every day laborers as the normal working season resumes.
Retailers are needing to restock shelves that have had inventories at their lowest levels in quite some time with a significant uptick in consumer spending, particularly among the all important teenage group, rising around 8-10% over last year.
With a job market already gaining momentum, the situation right now seems to point to a pretty strong jobs rebound during at least the summer months of 2010.
Who provides a really convincing and frankly well researched but complicated analysis of why it's very possible that a strong job recovery can take place this year is emerging markets and banking analyst, James Kostohryz.
"Various indicators such as the low level of employment relative to production and sales, the extraordinarily high level of productivity growth, the very high levels of free cash flow relative to sales, the low levels of inventory relative to sales, the strong recovery of the corporate bond market, and various other indicators strongly suggest that the US economy could experience a case of “Okun’s Revenge” in 2010 in which employment growth in the next few quarters rebounds much faster than the rate of GDP growth would normally imply."
To read the complete piece (and believe me, you should), check him out at The Free Republic (weird choice of publication, for this piece, I know)
All of this sets up for a mid-term election that may provide much more mixed results than anyone might expect.
Without any doubt, a strong jobs recovery will improve Obama and Democrat's approval ratings and improve their chances in the November elections. Even a moderate jobs recovery for the next few months could really abort the polling nosedive they seem to find themselves in right now.
A recovery is definitely taking hold and if significant could really end up putting Republican's in an awkward spot with plans on running solely on repealing Health Care reform.
I admit, I was wrong in a previous ideas piece I had written. If the unemployment problem remained strong, then Obama and Democrats would be in trouble, but the economy is on an uptick at precisely the right time and right when it's needed.
The more the economy shows strength, the more Democrats will be able to run on it. If it remains weak, then the relationship will likely not be made by voters and the expectations of a blue bloodbath in November may end up being satisfied.