Suppose you are advising Hillary Clinton, now the presumptive Democratic nominee for president. What worries you? Well, probably the stubbornness of Bernie Sanders, who won’t admit he’s lost. And, of course, the unpredictability of Donald Trump, whose outlandish pronouncements defy conventional political wisdom.
But what really ought to frighten you is the government’s latest employment report. It raises a fearful specter: recession.
This could transform the campaign. The argument now is mostly over character and experience: Who’s most suited to be president? This seems to give Clinton the edge based on her long involvement with government and policy. But a recession would dramatically shift the focus to the economy. Advantage Trump? He would surely brandish his business credentials and label the slump Obama’s Recession or Clinton’s Recession.
Let’s review the economy’s performance. Superficially, it seems a Democratic political asset. The recovery has proceeded for seven years. From employment’s low point, jobs have increased by more than 14 million. The unemployment rate has hovered around 5 percent since August (it was 4.7 percent in May). President Obama has repeatedly argued: The Republicans made the financial mess, and we’ve cleaned it up.
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But now comes the May employment report suggesting a slowdown and possibly a recession. The report, released June 3 by the Labor Department, was weaker than expected. Payroll jobs increased by only 38,000; job creation for the previous two months was revised down by 59,000. Since March, payroll jobs have grown at an average monthly rate of only 116,000, half of 2015’s 230,000.
None of this was anticipated, but neither does it make a recession inevitable. It could signal that the economy is at or near “full employment” — there aren’t that many more workers left to hire. Or it might reflect the recovery’s patchy nature, with rapid growth in some quarters and virtual stagnation in others.
In a June 6 speech, Janet Yellen, chair of the Federal Reserve Board, was “cautiously optimistic” about the outlook. She found many signs of strength. Vehicle sales are booming at more than 17 million units annually. The housing market continues to expand. She even cited evidence of a healthy labor market, in spite of the slow job growth. The quit rate — the share of workers voluntarily leaving their jobs — is now close to pre-recession levels, indicating that “workers are feeling more confident about the job market and are likely receiving more job offers.”
Still, she noted less favorable omens: not only the weakness in job creation but also a reluctance of companies to invest in new plants and equipment. She also warned that all forecasts involve huge uncertainties. What will happen to oil prices or China?
Prosperity is a state of mind as well as a state of production. The next few months will be crucial in shaping the perceptions that Americans take into the voting booths. What’s a Clinton adviser to do? Well, maybe take the offense and blame all the uncertainty caused by Trump for companies’ reluctance to hire and invest. If there’s a recession, the election’s outcome may depend on whose name gets attached to it.
Mr. Samuelson has written about business and economic issues since 1977.