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Improving Unemployment Numbers Make Political Case for Jobs Bill Stronger, Not Weaker

Paul Krugman is worried that the today’s relatively good employment situation report — just 11,000 jobs were lost, and the unemployment rate (which is calculated from a different set of data) dipped nominally from 10.2 to 10.0 percent — may deter Congressional action on a jobs bill that might push that number down further.

Perhaps Paul is right — no one has a keener sense of the ways in which political factors have become endogenous parts of the economic equation. But the Democrats would be silly if they failed to take action on a jobs bill. The economy, needless to say, is a long ways from full employment and will continue to be so for a very long time — a bill that reduced unemployment by, say, 1.0 percent for a period of 18 months would not encounter diminishing returns. Indeed, since most of the improvement in the numbers seems to have come because employers have stopped firing people, but have not actually begun to hire new staff in great numbers, job-creation incentives would work somewhat at the other end of the candle.

Nor, certainly, ought the employment numbers to weaken the political case for jobs bill. You can look at the politics of job creation in essentially two ways: either there is a roughly linear relationship between the unemployment numbers and the number of seats that Democrats will retain in the Congress, or there are some sort of threshold effects. If the former, then the case is not changed at all. A bill that would create 2 million new jobs and save 13 seats in the Congress will still create 2 million new jobs and save 13 seats, regardless of the starting point.

In the latter case, the outcomes are more binary: the Democrats’ job creation efforts will either tend to be branded as a “success” or a “failure”, and their performance at the midterms will follow accordingly. But if there is more organic momentum in the jobs market, that makes it less likely that the Democrats pass a “successful” jobs creation bill but fail to get credit for it. For example, suppose that a jobs bill reduces unemployment by 1 percent relative to the status quo. If the status quo unemployment figure were headed upward to 10.8 percent, this would only get things down to 9.8 percent — and the Democrats’ policies would probably be branded as a failure. But suppose instead that status quo unemployment is headed downward to 9.3 percent by next summer. Now the jobs bill would get things down to 8.3 percent, and they’d come out looking pretty good. With more of a wind at their backs, then, the Democrats will have the same reward but with perhaps considerably less risk.

Plus, there are the intangible benefits to pushing a jobs bill forward: Republicans will either have to help the Democrats get the jobs numbers down and give Obama a “bipartisan” victory, or they’ll oppose the bill and risk looking like out-of-touch hypocrites. It’s not like they’ll be eager to say that the economy is actually recovering and therefore does not need a jobs bill, which would tacitly acknowledge the success of the Democrats’ original stimulus. In contrast to the politics of health care, where the Democrats are damned if they do and damned if they don’t, something the opposite is true on the jobs program. (Unless the White House and the Congress really screw up the strategizing — a possibility we would be foolish to neglect.)

Meanwhile, it would help to get the Democratic base excited. If the base is weighing, say, health care reform without a public option, a decent financial regulation package, and the various stimulus efforts passed by the Congress this spring on the one hand, versus Afghanistan, Bernanke/Geithner, and inaction in areas like gay rights and climate change on the other, it could very easily be the presence or absence of a jobs bill that tips the balance in terms of enthusiasm.

Nate Silver founded and was the editor in chief of FiveThirtyEight.