President Obama will get the chance to take one final victory lap on the economy Tuesday — assuming financial market turmoil doesn’t rain on that parade.
Fundamentally speaking, the U.S. economy is in a much, much better place today than it was when Obama first took office. The unemployment rate has been halved from 2009 highs, the economy is consistently growing, and the Federal Reserve believes the U.S. is strong enough to withstand interest rate increases for the first time since the crisis.
{mosads}Indications that things are going well in Obama’s economy were on full display Friday, when the Labor Department reported 292,000 new jobs in December, nearly 50 percent higher than economists had predicted.
“The President can confidently say the U.S. economy is strong,” said Dr. Mark Zandi, chief economist at Moody’s Analytics. “At the current pace of job growth, if sustained, which seems likely, the economy will be back to full employment by this summer. This is a significant achievement given that the economy was in complete disarray when he took office.”
But the beginning of Obama’s final year in office has not been all roses on the economic front. The stock market, which had reached new highs under Obama, has been a black mark in the first days of 2016, as disaster in China has spread worldwide.
Concerns about China’s economic growth led to major declines in that country’s stock index to open 2016, forcing regulators there to freeze markets two days running. In response to that drama, the Dow Jones Industrial Average dropped hundreds of points, making the first four trading days of 2016 the worst on record.
Even after Friday’s strong jobs report, financial markets could not hold on to any gains, as the Dow closed Friday down 167 points, marking a 1,082 point loss for the first week of the year.
The brutal first week of trading actually led to some chatter that relatively good economic times could be coming to an end, and another U.S. recession was discussed as a possibility in financial circles. Billionaire Democratic donor George Soros even went so far as to invoke the last financial crisis to explain China’s current struggles.
“China has a major adjustment problem,” Soros said at a Sri Lankan economic forum, according to Bloomberg “I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”
But State of the Union speeches, where standing ovations are tallied as statistics, are rarely a place for grim outlooks. And Obama has kept to that trend, finding economic silver linings nearly every year he addressed Congress.
The lone exception was his first joint address to Congress shortly after being elected, when the nation was still in the throes of a recession and the aftermath of the financial crisis.
But beginning in 2010, Obama has consistently noted growing corporate profits and millions of new American workers each time he spoke before lawmakers.
And while there is little reason to expect his final address to be any different, images of deep red financial markets and traders in angst could complicate Obama’s efforts to put a final stamp on his economic achievement.
For now, Wall Street’s struggles have been isolated, but the concern is that enough bad news coming from that sector could begin to spook average Americans, who in turn pull back their own economic activity.
With many expecting incoming data to show a slowdown in economic growth in the final months of 2015, there is some concern bad news could begin to snowball.
Scott Anderson, chief economist for the Bank of the West, has trimmed his expectations for the U.S. economy in 2016, and warns it could get worse.
“If U.S. consumers get spooked by the economic and financial uncertainty and stop spending or companies start putting their hiring plans on hold, our 2.0 percent forecast may still be too aggressive,” he said Friday.
Further weighing on Obama’s economy is the persistent lack of gains in wages. With many Americans on the low end of the income scale feeling little to none of the economic recovery, the news of a large number of new jobs is little comfort.
That trend continued Friday, when the Labor Department reported wages actually fell slightly in December. In 2015, wages were up just 2.5 percent. That’s an all-time high under Obama, but still well below the 3 to 4 percent economists typically would expect with this level of job growth.
And no matter how 2016 goes for Obama, it’s unlikely paychecks that have stayed flat will be jumping up anytime soon.
“The benefits of the strong economy have yet to be felt by lower income households,” said Zandi. “This will only happen when the economy has been at full employment for another year or two, once President Obama has left office.”