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Jobs numbers boost Obama, needs lasting trend

President Barack Obama talks about the economy in Arlington
President Barack Obama talks about the economy in Arlington

By Patricia Zengerle

WASHINGTON (Reuters) - An unexpectedly strong jobs report on Friday boosted President Barack Obama's re-election prospects, but the trend must last to deny his opponents the biggest cudgel they have to bash him before the November election.

The U.S. economy created jobs at the fastest pace in nine months in January, and the unemployment rate unexpectedly dropped to 8.3 percent, its lowest level in three years, since just after Obama took office.

The report meant that unemployment has dropped every month since August, when it was 9.1 percent - good news for the Democratic incumbent as he fights to stay in the White House.

"I think it transforms Obama from being the shaky favorite to being the clear favorite now," said Greg Valliere, chief political strategist at the Potomac Research Group consultancy.

"We looked at the number very carefully. There are no flukes in the number. It was unambiguously strong. It greatly diminishes the threat that the economy would slow in the first quarter," said Valliere, who advises investors on public policy.

The economy is the most important issue for U.S. voters ahead of the November presidential and congressional elections, and unemployment is their biggest economic concern.

"The economy is growing stronger and the recovery is speeding up," Obama said on Friday.

Obama used his remarks to appeal to Congress to support his call to renew a payroll tax cut and demand that legislators do not slow the recovery. "Don't muck it up. Keep it moving in the right direction," he said.

But five months' of improvement does not end economic worries surrounding Obama's re-election prospects. Unemployment is still historically high, millions of U.S. workers have given up looking for work and another slump could be devastating.

"Three years of having a very bad labor market has resulted in a significant portion of the population just being unemployable," said Matt McDonald, partner at the Republican-aligned Hamilton Place Strategies.

He estimates that about 3.8 millions workers have dropped out of the job market and projects that if the labor force participation rate levels off at its current rate, Obama needs 231,000 jobs per month to get below 8 percent unemployment by Election Day.

Friday's report showed 243,000 jobs were created in January.

MORNING AGAIN IN AMERICA?

Only one U.S. president since World War Two has been re-elected with a jobless rate higher than 6 percent. Ronald Reagan secured a second term in a landslide in 1984 with a 7.2 percent rate, but it had been falling and Americans were convinced that things were getting better.

"This is starting to look like 1984," Valliere said.

But with nine months remaining before voters go to the polls, there is plenty of time for things to turn sour.

"You are dealing with a shift from high unemployment to still high unemployment, and this doesn't solve the kind of economic anxieties that many Americans have. The population is still very concerned, very worried," said Princeton University professor Julian Zelizer.

"What you want is these kinds of economic indicators in September, in October, rather than now," he said.

Still, the report left Republicans scrambling to welcome the improving jobs picture, without giving Obama's policies credit.

Mitt Romney, the front runner in the race for the Republican nomination to oppose Obama in November, pointed to the economy's sluggish 1.7 percent growth in 2011, noting that it was the weakest year of recovery since World War Two.

"We welcome the fact that jobs were created and unemployment declined," he said. "Unfortunately, these numbers cannot hide the fact that President Obama's policies have prevented a true economic recovery. We can do better."

Romney, above all the other candidates, has made jobs and the economy his signature issue. His campaign has routinely pounced on bad economic news within minutes.

Congressional Republicans used the report to call on Obama and Senate Democrats to stop gridlock on Capitol Hill and pass more than 30 bills that have passed the Republican-dominated House of Representations. Their job creation agenda is centered around easing regulations such as pollution controls.

"Our economy still isn't creating jobs the way it should be and that's why we need a new approach," House Speaker John Boehner said in a statement.

The Democrats also have to walk a fine line. With voters still suffering, they cannot seem too confident or say that things are too good.

"These numbers will go up and down in the coming months, and there's still far too many Americans who need a job, or need a job that pays better than the one they have now," Obama said in a speech on his proposed "Veterans Jobs Corps" at a Virginia firehouse.

(Reporting By Patricia Zengerle; Editing by Deborah Charles and Vicki Allen)

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