Tony Fratto: Job Creation Honesty is Job One
The U.S. unemployment rate today is estimated at 10.2%, and considerably higher if underemployed and discouraged workers are counted. Tomorrow, that rate is almost certain to be higher when the Bureau of Labor Statistics releases its estimates for November payrolls.
Economically, these are distressing numbers. The economy can't sustain growth until the labor market recovers. Final demand still matters, and a successful economy still needs people willing to buy stuff, and people don't buy stuff when they don't have jobs or fear for their jobs.
Politically, the jobs data are disastrous for the Obama Administration and Democrats in Congress, and its the reason the White House organized today's Jobsapaloozafest in Washington.
For a White House that has shown itself this year to be myopically focused on rhetoric to get through the daily news cycle, the stubborn, steady increase in the unemployment rate -- reported in scheduled monthly increments -- is bedeviling. The panicked frenzy of jobs talk today is an effort to keep the jobs conundrum from continuing to impact the Administration's current legislative efforts -- on health care, energy, and regulatory reform, and later, on deficit reduction.
The White House would have a better chance of making its case had it not over-promised on job creation earlier this year when it passed its mammoth spending bill.
Back then, trying to secure votes for the $787 billion bill, White House economists not only estimated a much lower unemployment rate, they ignored all history, all academic work on labor markets, and predicted a hiring turnaround this year. Now they're left dealing with the consequences of their hopeful predictions: a dispirited American public, and members of Congress scrambling to save their careers.
If the Obama Administration's economic team -- Larry Summers, Tim Geithner, Christine Romer and Jared Bernstein, had been honest in their job growth predictions earlier this year, they would have more credibility today in explaining the state of the economy.
An honest assessment of the U.S. economic outlook in February would have predicted that job growth was going to lag -- and because of the unique nature of this recession, job growth would certainly lag longer.
What the Obama economic team had to know was that job creation large enough to bring down the unemployment rate could not occur this year, even with the rosy estimates of GDP growth, since discredited, they peddled to pass the stimulus bill in February.
When an economy emerges from recession, job growth is last to recover -- after corporate profits, and after increases in business investment. Business investment only comes when businesses are confident that the recovery can be sustained. And businesses are not yet confident of a sustained economic outlook.
The outlook of the business community -- the people who create jobs and hire Americans -- remains uncertain. They see stimulus spending running out of steam, and a continued lack of access to credit. And across a broad array of policy areas -- everything from health care, energy, regulation, trade, investment, and tax policy -- the business community sees risks to their business models.
Job creation will eventually return, but it's going to be a long road to work through these uncertainties before we get there.
Nothing the Administration says today will change the likelihood that the unemployment rate will remain high for a long time. The best the Obama Administration can do today is throw out its past predictions and give Americans an honest outlook.
Tony Fratto is a CNBC on-air contributor and most recently served as Deputy Assistant to the President and Deputy Press Secretary for the Bush Administration.