Economic Glass Half-Full?

This is a rush transcript from "Special Report," Janauary 7, 2011. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

PRESIDENT OBAMA: The economy added 100,000 jobs last month and unemployment rate fel l sharply.  We know these numbers can bounce around from month to month, but the trend is clear.

SEN. JEFF SESSIONS, R- ALA.: That’s not really a number that we can celebrate today.

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: It's about what we expected, but as you say, it's not a number -- if we continue at this pace we'll not see sustained declines in the unemployment rate.

(END VIDEO CLIP)

BRET BAIER, HOST OF “SPECIAL REPORT”: December jobs report is out. The rate fell nearly half a point to 9.4 percent but only because many people gave up looking for work according to economists, and they also, the economists expected more than the gain of 103,000 jobs. They were looking for 130,000, 150,000, maybe even 200,000.

What about this report, how it factors into the economy and what’s happening on Capitol Hill? Let's bring in our panel, Steve Hayes, senior writer for the Weekly Standard, A.B. Stoddard, associate editor of The Hill, and syndicated columnist Charles Krauthammer. A.B.?

A.B. STODDARD, ASSOCIATE EDITOR, THE HILL: Well, the jobs news was not, was not great. But it was what the White House needed to hear, and that is because of the trajectory of joblessness.  It is going in the right direction for the president.

It needs a lot of improvement. If it was going in the wrong direction and back up to 10.4 percent, you know, he would be hammered for that. He wants to see a trajectory in the right direction. He hopes over time it will improve.

You are right that the economy needs to add over 200,000 jobs a month to get us out of the woods. It looks like we're going to be in a very unsettled jobless period for a long time, for years to come. But I do think there are other, there are other troubling signs. Underemployment is now almost at 20 percent. So you have nearly one in five workers --

BAIER: Explain what underemployment is?

STODDARD: The underemployed is you're not employed enough. You can't make ends meet and you’re looking for more work.

This is the problem with the long-term unemployment, so desperate that people are leaving the system not looking for work. So what we could see as the economy begins to heat up is worse joblessness as more people enter the system, seeing hiring and hoping they, too, can find a job.

So it's not great, but, as I said, they just didn't want to see the numbers take it to a different direction.

BAIER: Steve?

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: I think that’s right. If you look at the number of people who are no longer counted, that accounts for why at least half of why the unemployment rate dropped from 9.8 percent to 9.4 percent, people who basically said forget it, I'm not looking for work anymore. So that’s a problem. And it suggests that you are likely to see in the near term future, that number, the rate go back up.

I think the problem for the White House and A.B. alluded to this in using the number of 200,000 jobs a month.  Is even at that rate, 200,000 jobs a month, it would take according to David Leonhardt of the New York Times ten years to get the unemployment rate under six percent, which is something that I think would allow President Obama to actually go out and campaign and say look at what I've done to reduce unemployment. So politically they're a long way from where they need to be.

BAIER: Even if you supped it up to 350,000, it would be at least six years according to some analysts.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: All I can say is two days of a Republican House and you get a drop in unemployment of almost half a percent. That’s change I can believe in.

(LAUGHTER)

The numbers, I think, as indicated are really mixed, because half of the drop in the rate is attributable to people dropping out of the labor force entirely. So it’s a real artifact.

Again, if you look at the underemployment that A.B. is talking about, it actually went up. People who either are out of the workforce, part-time but want full-time or are entirely unemployed, that went from 16.3 million to 16.6 million.

However, politically only one number matters. All the others are sort of in the weeds. The political number that matters is the unemployment rate, and it did decline. Now I think you're right, the numbers inside tell us it's unlikely it will continue that decline. However, if you get some improve in the economy; just looking at this purely as a political issue, if unemployment is under eight percent on Election Day, you have a strong presidential re-election possibility.

You also have Obama's approval numbers over 50 percent in the Gallup, and you have the bump he got out of the successes in the lame duck and you get the change in personnel. He's positioning himself for a strong run, and if he even has a gradual decline, I think it puts him in a good position in two years.

BAIER: Speaking of the changes, Gene Sperling announced today to take over the job that Larry Summers had. Gene Sperling, of course, was the economic council director in the Clinton administration for President Clinton. A number of Clinton officials, A.B., now in the Obama White House. Some people call it not Obama 2.0 but Clinton 3.0.

STODDARD: Well, it's tried and true. It's been tested and it works.  It's called triangulation. You have to move to the center, you've lost the majority in the House. It really is it’s a time to bring in outsiders who are engaged with the business community and repair fragile relationship with corporate America.

He desperately needs to, not only for his re-election, because it's his only hope of improving the jobs picture. So you find these outsiders who are also veterans on the inside. They have no learning curve. They can come in and hit the ground running.

Gene Sperling has been in the same job before. Bill Daley comes in as chief of staff having served in many capacities in different campaigns and also the commerce secretary, really ready to come in and not only run the inside game but help him repair his business ties once again.

I think they're both really good picks that show self-awareness about how much political trouble he's in and what he needs to do to fight back.  And if you have to follow the Clinton formula, go for it.

BAIER: For Republicans, Steve, up on the hill, these jobs number, do they change the game, perspective, the plan?

HAYES: I don't think they change it at all. Because the focus for Republicans was and has been and will be spending and reducing the size of the government. It's a big picture argument, not a small argument about the details of, you know, a job report and change from 9.8 to 9.4 percent.

BAIER: Charles, last word.

KRAUTHAMMER: People are saying Obama is going through the Clinton retreads. But the historical fact is the Clinton administration is the only Democratic administration in the last 30 years. So if you’re going bring anyone in the administration with experience under the retirement age it’s got to be someone who served in the Clinton administration. So I'm in the sure it's a liability.

And it is a signal. Obama wants to reposition himself or he won't be reelected. And having the triangulating Clitonites is exactly the way you want to send that signal.

BAIER: You said yesterday you doubt the ideology has changed for this president.

KRAUTHAMMER: Look, I'll believe it when I see it. After what he did in the first two years, anybody who doubts he is a man of the left I think is ignoring reality.

BAIER: What is your reaction to the latest jobs number? Let us know what you think and vote in the online poll at Foxnews.com/specialreport.  The Friday lightning round is next.

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