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The new year 2010 wastes no time in offering investors a "data point of consequence" -- the U.S. Labor Department's December 2009 monthly nonfarm payroll report, commonly known as the jobs report, scheduled to be released Friday January 8 at 8:30 a.m. EST.
It's a data point of note because job growth is the key to a sustained U.S. economic recovery and earnings growth: although the economy certainly can grow for a while without net monthly job gains (as it did in 2002), it's hard to envision a scenario in which the expansion continues for two, three, four or more years without job growth. And, by extension, job growth is intrinsic to both household formation, rising corporate revenue and stock prices. A Bloomberg News economists survey expects the U.S. economy to record zero job growth in December 2009, after losing a scant 11,000 jobs in November 2009.
The nation has lost more than 7.6 million jobs amid the worst recession for the world's largest economy in more than 25 years.
Further, the job growth issue also is pivotal for the Obama administration, due to the relationship between economic success and presidential success. Although unexpected international events can occur at any time and create a crisis for a president, all other factors being equal, job growth is the most important political issue for President Obama and the congressional Democrats. Absent job growth, President Obama's approval rating will likely fall, and Republicans will likely then pressure him and conservative Democrats to cut federal spending and/or withdraw fiscal stimulus to cut the budget deficit. The GOP will also chirp about withdrawing quantitative easing on the monetary policy side.
However, with job growth President Obama's approval rating will likely move back above 50%, and increase his political capital, which will encourage congressional Democrats to support the administration's policy proposals, and get behind his momentum on the road to a November 2010 election victory. Job growth amid an economic expansion would also, obviously, neutralize many of the partisan critiques by Republicans, including the tactic to cut the budget deficit through spending cuts alone.
In sum, as it almost always is, the economic/political landscape in 2010 will be determined by objective conditions, and job growth -- or the lack thereof -- is a big one.
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Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.
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