After Wall Street stabilized in the spring, it didn't take long for the economy to become a political afterthought to the major battle of the year in Washington: health-care reform. But Tuesday's off-year election broke D.C.'s political trance like a brick through plate glass. Republicans triumphed in two major gubernatorial races, thanks largely to independents fleeing Democrats over economic worries. Suddenly every politician in town cares about the economy more than anything else.
So Friday's jobless number from the Labor Department will quickly become a political football. The Labor Department reported that the widely watched unemployment rate rose to 10.2%, the highest rate since April 1983, as nonfarm payrolls declined by 191,000 in October, down from a revised loss of 219,000 jobs in September.
The job news may actually provide fuel for both camps. The rising unemployment rate bolsters Republicans who have been arguing that the stimulus bill, which most economists credit with speeding economic recovery, has only made matters worse on the job front, with October's numbers showing that the economy is continuing to shed jobs. "It's bewildering to see the same Administration that sold its trillion-dollar spending plan this spring as a guarantee against 8% unemployment claiming it created 1 million jobs, especially since it is a sad fact 3 million jobs have been lost since the stimulus was signed into law," said Senate Republican leader Mitch McConnell on Thursday, Nov. 5.
Democrats privately have been hoping that the surprisingly powerful economic turnaround will start producing real job growth by next spring, and the declining pace of job losses backs that hope up. "With the economy growing again, things should feel more solid by spring, and that should start working to our advantage," says a senior Treasury official. Friday's report offers some comfort on that front, in that the monthly job-loss number continues to trend downward, and also because the 10.2% jobless rate gives the Federal Reserve little reason to begin raising interest rates anytime soon, which augurs well for economic improvement in 2010.