- The Washington Times - Tuesday, October 13, 2009

A distressed economy is widely blamed for President George H.W. Bush’s re-election defeat in 1992, and a decade earlier, for the loss of 26 House seats in midterm elections by Ronald Reagan’s Republicans. Yet in both instances, the recession already had ended or was winding down.

It’s a point not lost on President Obama’s White House or congressional Democrats headed into next year’s midterm elections. The stock market may be up, service industries may be recovering, banks may be lending again and housing prices holding. But one major piece of the recovery puzzle is still missing — more jobs.

That’s bad news for the party in power, whether the recession is officially over or not.

Job losses are expected to continue at least into the middle of next year, likely driving the unemployment rate above 10 percent from 9.8 percent last month. It could take three or four more years for it to fall to historically normal levels.

The longest and deepest downturn since the Great Depression has claimed 7.2 million jobs since December 2007. Analysts figure 750,000 more jobs could disappear over the next six months.

Add in people who have stopped looking for work or are working part time when they want a full-time job, and the unemployment rate is a whopping 17 percent, according to the Labor Department.

“If you’ve got an effective unemployment rate of 17 percent and if this goes on for any length of time, a year or more, then everyone’s cushion will run out,” said Republican consultant Rich Galen. “There are going to be serious implications, culturally and politically.”

Mr. Galen said it is understandable that Republicans would use the state of the economy to pound Mr. Obama and the Democrats who control Congress. Still, “it’s not something we should either make fun of, be amused by or play politics with,” he said.

Republicans already see a “jobless recovery.” In a letter to Mr. Obama and House Speaker Nancy Pelosi, House Republican leaders asked, “Where are the jobs?”

The attacks have been so stinging that Lawrence H. Summers, Mr. Obama’s top economic adviser, released a letter Monday written to House Minority Leader John A. Boehner, Ohio Republican, challenging Republican claims about the impact of Mr. Obama’s $787 billion economic stimulus program on employment.

Another sign of continuing distress: Applications for Social Security retirement benefits are up 23 percent from last year, a much larger jump than in other recessions.

The surge is caused by a rush of baby boomers filing for early retirement. Signing up for Social Security benefits as early as age 62 can be an immediate source of income for laid-off older workers, but it’s also a troubling sign of the scarcity of jobs.

Economists agree that unemployment is a lagging indicator and can remain high long after a recession is formally declared over, continuing to inflict pain on those still out of work or worried about their jobs.

And that likely will be an important political dynamic as 2010 midterm elections approach.

At some point, continued job losses easily could push the economy back into negative territory for a politically toxic “double-dip” recession.

Hedge-fund manager Douglas Kass, founder and president of Seabreeze Partners Management, questions the ability of the economy to mount a self-sustaining recovery under continued elevated joblessness and wage deflation. “The consumer remains the Achilles’ heel of the economy,” he wrote recently.

The White House and congressional Democrats are considering a number of measures to boost employment, including extending and expanding an $8,000 tax credit for first-time homebuyers due to expire at the end of next month and tax breaks for companies that add jobs.

Rob Shapiro, an economist who was a top official in President Clinton’s Commerce Department, sees “substantial, continued job losses” for some time if the government does not take more aggressive steps to foster job growth.

In the meantime, the Obama administration should “prepare the American people to wait a while for real results,” said Mr. Shapiro, now with a Democratic think tank called NDN.

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