It's No Ordinary Recovery. So Why Should It Be An Ordinary Election?

In the last day we've heard experts in the political world issuing various sounds of celebration (Obama) and consternation (Romney) over the new jobless numbers and the booming stock market. But the reaction on both sides is probably premature at best. Just as this is no ordinary economic recovery, it's wrong to assess the presidential election odds using the ordinary metrics.

True, the Obama-ites have reason to peek up from their defensive crouch, and the Romney camp has been forced to duck into one. The drop in the unemployment rate to 8.3 percent continues what will be the president's best hope of re-election: an upward trend in hiring that persists until election day and undermines Romney's claim that only he can turn the economy around. We've now had five consecutive monthly declines in the unemployment rate, and if that continues, voters may react more to the forward motion than the absolute numbers, even though the current 8 percent levels are still hard for an incumbent to overcome and the jobless rate is likely to remain higher than it was at Obama's inauguration (7.8 percent) by election day. The Dow's return to levels not seen since May 2008, before the final financial collapse, is also a major milestone back into positive territory for Obama.

But keep in mind: this is still the worst economic crisis since the Great Depression. "We have never seen unemployment this high for this long," says Heidi Shierholz, an economist at the Economic Policy Institute, who notes that jobless rates have now exceeded 8 percent for a record 35 months, surpassing the early '80s recession mark of 27 months.  As I've previously written, an issue that could be more telling for Obama's future could well be the long-term unemployment rate--workers who have been out of a job for more than six months, in many cases a year or more, and can't find a new one no matter how hard they try. "What's really different in this recession is that we have people who really want to be working and really can't find work," Betsey Stevenson, until recently the Labor Department's chief economist, told me recently.

The labor market simply isn't clearing as readily this time around, in part because of long-term unemployment, in part because of business uncertainty over Europe, regulation, political gridlock and other issues, in part because of other pathological conditions that the nation has rarely, if ever, dealt with before. That's especially true of the underwater housing market that Obama only now seems to be realizing is far worse than he thought. "I'll be honest, the programs we've put forward didn't work at the scale we'd hoped," Obama said this week, and on Saturday he pressed the point home in his weekly radio address, urging Congress to pass a plan he took far too long to develop: using the Federal Housing Administration to guarantee refinanced loans at lower rates for underwater borrowers.

But Obama is still not using the sort of strong-arm tactics he could be employing, critics say, such as forcing Fannie and Freddie to take more action to help mortgage holders (they are in receivership, after all). That would require extraordinary political courage. And in the Bizarro world of Washington, it's somehow OK to ignore the "moral hazard" of spending hundreds of billions of dollars to bail out banks with no questions asked, while the idea of helping the victims of those banks is still deemed a sin that might undermine the beautiful purity of capitalism.

As a result, the mortgage and foreclosure crisis remains a spreading infection that has gone largely untreated. It has prevented a resurgence of demand in a consumer economy that, because of stagnant wages, had become dependent on debt and refinancing for growth until the crash. Both the size of the housing bubble and the implosion that ensued also were unnaturally severe because of the sheer amount of housing and securities fraud that fed the mania. Many banks may still be technically insolvent because of the devalued mortgage-based securities and loans they have on their books. Even so, "from the beginning, all the proposals for relief were too small," whether from the administration or the Congress, says Diane Thompson of the National Consumer Law Center.  "They underestimated the amount of fraud. And I think they overestimated the good will of the bankers."

What the Obama team, and the Congress, failed to estimate well at all was the unusual nature of this economic disaster. Much will depend on the political success that Obama has pinning a good part of the blame on George W. Bush and the Republican-led Congress, versus the skill with which Romney pins much of it on Obama. And that is why when it comes to this presidential election, the usual numbers don't mean a lot.