Published July 01, 2010
As President Obama tries to hotwire Congress into tackling what's left of his campaign-trail promises, the economic picture is taking a severe turn - one that may require him to once again recalibrate his ambitions in an election year.
The housing and unemployment numbers out Thursday morning underscored a disturbing trend. With the expiration of the $8,000 homebuyer tax credit, national figures from May suggest the real estate market is not ready to stand up on its own.
The National Association of Realtors released a report Thursday showing the number of buyers under contract plummeted 30 percent in May to the lowest level on record. That was after the Commerce Department reported last week that new home sales fell 33 percent last month, also to the lowest level on record.
New jobless claims also rose for the second time in three weeks, ahead of the release of June's unemployment number, which is expected to show only the slightest increase in private sector jobs.
A Congressional Budget Office report out Wednesday underscored the implications for the country's long-term health of a persistently weak economy. Fewer jobs means fewer taxpayers, which means less revenue for the government. If intensive federal spending is not yielding a return on investment, the government is that much deeper in the hole.
CBO Director Douglas Elmendorf wrote on his blog that unless the government finds a way to bring in a lot more revenue and make major spending cuts, the persistently high deficits could "push debt to unsustainable levels." Under one scenario, the CBO said debt would reach 109 percent of GDP by 2025 and 185 percent by 2035.
The trend lines are drawing renewed criticism of the Obama administration's approach to the economy and may imperil his attempts to tackle multiple domestic challenges in the months ahead.
On Thursday, the president delivered a speech calling for congressional action on an immigration overhaul package. He recently used the BP oil spill to call for comprehensive energy legislation.That's on top of a banking overhaul bill that passed the House but faces a tough slog through the Senate.
Though Obama is under pressure to guide the oil spill cleanup and Gulf Coast recovery at all costs, his congressional critics say the administration needs to take a new and focused approach to the economy.
"The president promised when he signed the (stimulus) bill that unemployment wouldn't exceed 8 percent. But now it's nearly 10 percent," House Minority Leader John Boehner told Fox News. "It hasn't created jobs."
Boehner's office released a report on stimulus spending Wednesday accusing the administration of backing a misguided economic strategy and noted that there aren't nearly enough job openings to make a dent in the unemployment problem. "With just 2.7 million job openings in March, there were 5.6 unemployed Americans seeking each available job," the report said.
White House economic advisers have described the economic recovery as one where job creation will eventually follow overall economic improvement. But even that has flagged. While the economy grew 5.6 percent in the last quarter of 2009, revised figures show it grew just 2.7 percent in the first quarter of this year - not the kind of economic surge needed after a period of sharp decline.
The stock market also is struggling to approach pre-recession highs. After touching 11,000 in April, the Dow Jones Industrial Average closed the second quarter at the lowest level for the year, and down 10 percent from just three months ago, to below 10,000.
And manufacturing orders dropped to their lowest level since October. The index fell by the largest monthly decline since December 2008.
Obama is keeping a positive outlook, however, noting the gains that have been made under his watch.
"When I was sworn in, we were losing 750,000 jobs a month. ... The economy was shrinking at 6 percent," he said at a town hall in Wisconsin Wednesday. "Today, it's growing again."
Rep. Jan Schakowsky, D-Ill., said the economy is "heading in a better direction" and that the government is committed to building on those improvements.
"It is about jobs, jobs, jobs," she told Fox News.
House Speaker Nancy Pelosi told reporters Thursday that unemployment checks are the fastest way to spur job creation, since they give families money to spend.