by John M. Curtis
(310) 204-8700

Copyright Aug 7, 2009
All Rights Reserved.

        Unexpected and welcomed jobs’ numbers gave President Barack Obama a needed shot in the arm, boosting his chances for passing meaningful health care reform when Congress reconvenes in September.  While the nation still lost 247,000 jobs in July, that was dramatically improved over the 443,000 lost in June, telling economists that the economy appears headed out of recession, perhaps by the end of the quarter.  Obama’s GOP critics have been hammering him for months, trying to lay the entire recession at his feet.  Barack’s 68% approval ratings last November has come back to earth, now standing at around 54%, more closely mirroring a divided electorate.  With the economy climbing out the worst recession since WWII, it’s taking its toll on Barack’s approval ratings.  Today’s 9.4% unemployment rate and slowing jobs’ losses should help Obama’s approval ratings.

            Continuing a relentless upward trend, the Dow Jones Industrial Average posted another 100-plus point rise, ending the day at 9,370, a whopping 42% gain from the 6,500 bottom hit in March.  Republicans complained that Wall Street couldn’t rally under Obama’s economic policies, blasting the 48-year-old first-term president for socialist policies, blaming his $790 billion economic recovery program for the economy’s nosedive.  While knowing that Barack’s policies followed closely those of his predecessor former President George W. Bush, whose $690 billion stimulus plan—known as Toxic Asset Relief Program [TARP]—tried to rescue the nation from economic collapse.  When it was Bush’s program, it was engineered capitalism. When it was Obama’s, it was socialism.  Today’s numbers help silence Barack’s critics only looking for bad news.

            Wall Street’s spectacular rise during the usual summer doldrums anticipates a strong finish to the third and fourth quarters.  If the Dow and Nasdaq continue their upward trend, they could pull the economy into the black by the end of Sept. or Q-3.  More profits in Wall Street translate into more cash into the coffers of both the state and federal governments.  Stock accounts of publicly traded corporations should provide the needed capital to begin rehiring laid-off workers sometime next year.  “The worst may be behind us,” Barack told reporters in the Rose Garden.  “Today, we’re pointed in the right direction,” measuring his response, considering the Labor Dept. still reported nearly a quarter-of-a-million jobs lost.   If the trends continue into the Fall, Barack’s approval ratings will turn upward, causing more problems for the GOP hoping to make gains in next years midterm elections.

            Wall Street’s kingmakers, especially Goldman Sachs, understand that maintaining the current buying trend should keep the nation’s major funds earning whopping returns.  When Wall Street wins, the government collects the windfall of bountiful capital gains taxes, reducing expected federal and state budget deficits.  “If people and companies think the worst is behind them—and it probably is—their confidence will be restored,” said Richard Yamarone, economist at Argus Research.  “That confidence feeds on itself,” suggesting that today’s stock market momentum should translate into real economic growth.  When Federal Reserve Chairman Ben S. Bernanke announces he’s raising interest rates, it signals the Fed has confidence in the nation’s economic recovery.  If Bernanke leaves unchanged, he expects weak or unstable economic growth into the indefinite future.

            Consumers continue to hoard money, pay down bills and avoid retail sales, causing the current slump in the retail industry.  Big-Box stores like Cosco and Sam’s Club and mass merchandisers like Wal-Mart and Target continue hold their own, despite weakness in consumer spending.  Consumer spending won’t improve until the economy starts adding jobs.  While the current trend is positive, there’s still a record 4.97 million unemployment, contributing to the sluggish consumer spending.  On the brighter side, the government’s “Cash-for-Clunkers” program was just refunded for $2 billion and should provide welcomed boost to new car sales.  Refunding the program should last until Labor Day, helping the car business get back on its feet.  Ultimately, lenders will have to loosen retail and real estate credit, giving consumers the needed cash to boost the nation’s Gross Domestic Product.

            Today’s stock market rally and unemployment numbers are welcomed news to Barack heading into the Congressional recess.  While his approval ratings have suffered from the weak economy, more positive news only helps Barack’s chances of passing meaningful health care reform in the Fall.  With his Supreme Court pick Sonia Marie Sotomayor approved by the U.S. Senate, Barack regains his footing before his big push for health care reform.  If Wall Street continues its blessings, the economy should pop out of recession this Fall, paving the way for a strong end-of-year rally.  Despite all the GOP criticism, if the economy improves, Barack will be rewarded with a historic legislative victory and rising approval ratings.  More economic good news spells trouble for Obama’s critics, whose prophecies of doom-and-gloom only undermine their case heading into next year’s elections.

 John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com and author of Dodging The Bullet and Charisma.