'We still face some tough times, we still face some challenges,' the president said Friday. Economy to shift Obama '12 strategy

After months of relatively robust job growth, President Barack Obama and his team must now reckon with the reality that the economy probably won’t be on firm ground during the 2012 campaign — and that he must temper some of the Morning-in-America optimism he’d hoped to run on.

The president has been unable to curb the nation’s nine percent unemployment rate, so he will be forced to put the best possible face on a sputtering recovery.


Democratic strategists say that means adopting an ungainly three-pronged political approach: Talking up economic gains since the darkest days of 2008 and 2009, highlighting a modest job-creation agenda blocked by Republicans and making the case that things would be far worse if the GOP were in charge.

Above all, he must avoid even the slightest hint of triumphalism on the economy — no missions have been accomplished — to avoid angering Americans still struggling to find jobs.

Obama road-tested that hybrid approach in Toledo, Ohio, on Friday, hours after the Labor Department reported that the economy added a worse-than-expected 54,000 jobs in May and the unemployment rate ticked up to 9.1 percent.

“Even though the economy is growing, even though it has created more than 2 million jobs over the past 15 months, we still face some tough times, we still face some challenges,” Obama said Friday during a visit to a Chrysler plant.

“This economy took a big hit. It is just like if you had a bad illness, if you got hit by a truck, it’s going to take a while for you to mend. That’s what happened to our economy,” the president said. “It’s taking a while to mend.”

He also ticked off a list of “headwinds” beyond his control: Japan’s crisis, instability in the Mideast and rising gas prices.

That’s in sharp contrast to what some of his advisers have been saying privately, downplaying the likelihood of major economic shocks from Japan or pump prices. Instead, they have expressed concern that Europe’s economic crisis could flare anew, with potentially dire consequences.

Expectations for May jobs were on the order of 160,000, so the far smaller number came as an unwelcome surprise amid signs that the economy is slowing, as reflected in an anemic 1.8 percent GDP increase in the first quarter.

But most daunting to the White House is that Obama has few good tools at his disposal to jump-start the economy in the short term.

By ceding the argument to Republicans that the deficit is the problem, Obama helped steer the focus in Washington to cutting government spending, robbing the White House of its ability to argue for more stimulus measures. At the same time, the rise in fuel prices over the past six months has offset efforts late last year to boost consumer spending and job creation.

“He is in a corner, there is no question about it,” said Bill Galston, a senior fellow at the Brookings Institution and former adviser to President Bill Clinton. “He is in a political corner, a fiscal corner and an economic corner. The Federal Reserve has fired every gun in its arsenal, and there is no appetite in Congress for any more stimulus. There is every reason to think that the economy he has is the economy he is going to have for the reelection campaign, maybe plus or minus just a little bit.”

Wall Street money managers also say they do not see any way the administration can turn things around in the near term.

“There really isn’t anything big the president can do about this in the short term,” said David Kotok, chief investment strategist at money management firm Cumberland Advisors. “The big things he could do, like another large stimulus in which the government employs people in a Roosevelt-esque way to improve the nation’s infrastructure, are not likely to happen. And the smaller things won’t do very much.”

Democrats, for their part, are trying to contrast Obama’s actions — including an increasingly popular auto bailout he touted Friday in Toledo — against GOP opposition to any plan that doesn’t include deep cuts to government spending.

“Not one of the Republican presidential candidates has yet come up with single serious policy proposal on the economy,” said Neera Tanden, chief operating officer with the Center for American Progress, a think tank with ties to the Obama White House.

The Democratic National Committee launched an economics-based attack on former Massachusetts Gov. Mitt Romney Thursday, the day he announced his run for the presidency.

“Did you know that under Mitt Romney, Massachusetts ranked 47th out of 50 states in job growth?” asked DNC spokesman Hari Sevugan.

Republicans then pounced on the jobs report Friday, using it to boost their argument that Obama isn’t up to the task of turning around the economy. They pointed to the White House’s own projections from 2009 that the stimulus package would keep the unemployment rate below 8 percent.

“When the Europeans were in trouble economically, they spent more money and they borrowed more money. That’s just what he did,” Romney said at a campaign stop in New Hampshire. “He has been awfully European. You know what? European policies don’t work there. They sure as heck aren’t going to work here.”

Austan Goolsbee, chairman of the Council of Economic Advisers, said in a statement that the May data reflected the reality that there are “always bumps on the road to recovery, but the overall trajectory of the economy has improved dramatically over the past two years.”

“The initiatives put in place by this administration — such as the payroll tax cut and business incentives for investment — have contributed to solid employment growth overall this year, but this report is a reminder of the challenges that remain,” Goolsbee said. “We are focused on promoting exports, reducing regulatory burdens and making the investments in education, research and development, and infrastructure that will grow our economy and create jobs. We will continue to work with Congress to responsibly reduce the deficit and live within our means.”

He also cautioned against panic. “The monthly employment and unemployment numbers are volatile and employment estimates are subject to substantial revision. Therefore, as the administration always stresses, it is important not to read too much into any one monthly report.”

But markets were down on the news.

“Our economy is not creating enough jobs, and Democrats’ binge of taxing, spending, borrowing and over-regulating is a big part of the reason why,” House Speaker John Boehner (R-Ohio) said in his statement.

“This week House Republicans met with President Obama and urged him to change course and work with us to enact the plan for jobs and economic growth we have put forth. We hope the president will take us up on that invitation. We cannot solve our debt crisis without economic growth — and we will not have economic growth if we raise taxes on job creators and refuse to stop spending money we don’t have.”

Democrats, who have been frustrated with Obama’s focus on the deficit, renewed their call for Congress and the Federal Reserve to consider more job-stimulating measures.

“Well, someone has to stop blathering nonsense about the debt and start talking about creating jobs,” wrote Dean Baker, co-director of the liberal Center for Economic and Policy Research, on POLITICO’s Arena. “There is no employer in the country who is going to hire people because the government cut the deficit. They will hire people when they see demand. This will come from the government spending money. That should be simple enough for even a politician or political reporter to understand.”

The Labor Department also adjusted its April statistics down: A month ago, the department reported that nonfarm payrolls had grown by 244,000, but that number was corrected to 232,000. In addition, the March statistic was shifted downward, from 221,000 to 191,000.

“Republicans are going to start thinking that even a weak candidate can beat an incumbent with a weak economy,” said David Boaz, executive vice president of the libertarian Cato Institute, on POLITICO’s Arena.

“Since there are clear Obama policies that can be tied to the weakness of the economy — unprecedented spending and deficits, the kitchen-sink stimulus bill, heavy regulation and regulatory uncertainty, government takeovers — the Republicans will have a coherent message available: We tried his plan, we’ve spent trillions of dollars we didn’t have, and the economy is crawling.”

Ben White and Jennifer Epstein contributed to this report.