In this morning’s press release on the employment numbers for May, the Bureau of Labor Statistics’ lead was “no change”: non-farm employment “changed little (+69,000)” and “the unemployment rate was essentially unchanged at 8.2%.” But little change in a severely depressed labor market is very bad news for workers. Even worse news for the Obama Administration is that the labor market so far in 2012 shows no sign of the turnaround he needs.

While it’s true that the increase in employment of 69,000 was not much below April’s increase of 77,000, it was 143,000 in March and higher than that in February. The unemployment rate’s increase from 8.1% to 8.2% can be viewed as essentially unchanged because it’s small, but if these figures hold up, the data still show 220,000 more unemployed than the month before.

Unfortunately, this bad news is likely to hold up because the same trends appear across lots of related indicators: the recently unemployed (less than 5 weeks) increased from 2.54 to 2.58 million; seasonally adjusted initial unemployment insurance claims rose by 10,000 (to 383,000, about where it has been stuck for the last 6 months despite the tightening of eligibility requirements by many States); the long-term unemployment rate (27+ weeks) increased quite substantially, from 5.1 to 5.4 million), as did the median duration of unemployment (from 19.4 to 20.1 weeks). Significantly, the rate of those working part-time but want a full-time job also increased, from 7.8 to 8.1 million. And to top it off, average hourly pay for non-supervisory workers has been flat at $19.70 (up 3 cents from March).

The problem, of course, is that while private sector employers have not been hiring at a pace that offsets the massive job destruction of 2008-10, austerity politics is actually leading to absolute reductions in government employment, and at an accelerating rate. Obama is in a tough spot, since even if employment picks up dramatically, the unemployment rate could continue to increase as millions of discouraged workers re-enter the labor force.

It’s sometimes said that presidents don’t control the economic weather but rather it controls them. We have reached the moment, however, when magical powers are going to be attributed to the presidency, and the current incumbent, like the sorcerer’s apprentice, will be charged with incompetence in using them. One manifestation of this thinking is the Romney campaign’s recent claim that women have suffered more than 90 percent of the jobs lost since Obama became president, a blatant attempt to undermine his lead among women voters. This claim involves two distortions; and most of the mainstream media have caught what I view as the smaller one—namely, that the claim ignores the full history of the recession and the huge job losses borne by men when George Bush was president.

The larger distortion has generally gone unnoticed, indeed, it has been mostly accepted. According to it, some 740 thousand jobs have been lost on Obama’s watch. This claim is another expression of the Republican mantra about a “failed” presidency.  And it involves some statistical crafting to fit the data to the argument, manipulating data in a way that we are likely to see a lot more of as the campaign proceeds, especially given the huge amounts of money available to hire “researchers” to come up with “facts.”

The Romney campaign arrives at the estimate by attributing to Obama all of the job losses since February 1, 2009, even though he had barely taken office at that point and there was not enough time for any of the new administration’s policies to have an impact. To understand how much timing matters in this case, recall that Obama entered the White House when the labor market was already in a swoon, and the number of jobs lost that February was more than 700 thousand, on a par with the losses for the final months of Bush’s second term. If we tally the jobs record of the current administration from March 1 instead of February 1, then the jobs deficit under Obama shrinks dramatically to 16,000 and, with any luck, will be erased in coming months.

This dependence of any jobs statistics to the choice of a starting point obviously leaves the question of how best to characterize the Obama administration’s record, which has been challenged not just from Republican ranks but also from the left, by Paul Krugman and Noam Scheiber (in his book, The Escape Artists: How Obama’s Team Fumbled the Recovery), among others. There can be no doubt (see chart below) that the job market has been largely stagnant since the end of the Clinton years, except for the run-up that started in late 2003, fueled at least partly by the bubble that collapsed with the onset of the deep recession in December, 2007. Today, the total number of jobs in the U.S. economy is a mere 350 thousand higher than it was in February, 2001, when George W. Bush assumed office.

It’s not my place to assess the economic policies pursued by these two administrations and their role in this stagnation, and in the event, I lack the competence for such a task. Rather, in light of the consistent Republican charges of a “failed” President, especially because of high unemployment, I am looking for an empirical standard by which to assess labor-market changes while Obama has been President. The record under George W. Bush is an obvious reference point, since both presidents have had to face similar structural forces determining their economic weather, such as the growing impacts of globalization and computer-driven automation on the labor market, exemplified by accelerated off-shoring of jobs and the emergence of manufacturing jobs that cannot be filled because they require technical skills possessed by few in the U.S. workforce. Moreover, like Mitt Romney, George Bush is a Harvard MBA who worked in the private sector before entering politics and depended on tax cuts tilted toward the affluent to stimulate the economy.

There is also the issue of how to temporally calibrate the comparison, especially because the early months of the Obama presidency were affected by the precipitous economic slide that he was not responsible for. Starting the comparison therefore with the end of the recession, designated as June, 2009, by the official arbiter of economic cycles, the National Bureau of Economic Research, seems appropriate. The much shallower recession that took place during Bush’s first year gives us an equivalent starting point for him.

This calibrated comparison clearly turns out in favor of Obama. As the chart shows, some 2.3 million jobs have been created since the end of the most recent recession, while in the equivalent period after the end of the earlier one, about 700 thousand jobs were added to payrolls. There is, as noted, still a jobs deficit for the entire period Obama has been president, but that was also true for George W. Bush throughout his first term. In fact, the jobs market was still in negative territory when his second term began.

So, when the mantra of the “failed” presidency starts humming, and Mitt Romney characterizes Obama as one of the most “ineffective” presidents of all time, be wary when jobs statistics are hauled out to support these charges. The “data” are likely to be phony, to have been contrived to match the claims. They shouldn’t be allowed to enter public discourse unchallenged.

The failure of economics in the runup to and aftermath of the Great Recession has generated a lively debate about how to reform economics and more specifically about the renewed relevance of Keynesian economics, which had fallen out of favor since the 1970s. The Keynesian message, so important in this latest round of political wrangling over the increase in the US debt ceiling, is that cutting government spending in a slump will only worsen the unemployment problem. The role of expansionary fiscal policy, according to Keynesianism 101, is to provide demand for goods (and thus for employees to produce those goods) when the main sources of demand in a capitalist economy — households and businesses – are not providing a level of demand necessary to generate a socially acceptable level of unemployment.

Keynesianism 102 is about the multiplier effect of changes in spending. This is the notion that an increase in demand (from any source, not just government but certainly including government) will impact employment and incomes with a ripple effect. This includes a direct impact and then a secondary impact when the direct incomes are then spent (in some fraction) and an additional fraction of that is spent, etc.

There are two corollaries to the lesson of Keynesianism 102 that are worth mentioning because they have been raised in the current policy debate. The first is about the differential multiplier effect of a spending increase compared to a tax cut. Empirical studies show that the multiplier effect of the former is greater than the multiplier effect of the latter. The second is about the differential multiplier effect depending on the income of the recipients. Since the poor are more likely to spend a higher percentage of additional disposable income than the rich, a tax cut that benefits low-income people will have a bigger multiplier effect than a tax cut that benefits the rich.

These lessons have not been integrated into current economic policy in the US, where deficit spending and progressive tax reform and expanded benefits for the poor and unemployed have been successfully resisted by the Republican congress. Nonetheless, they are well-established lessons of Keynesianism that most professional economists would accept.

The argument against Keynesianism 101 revolves around the psychology of investor confidence in the face of a rising fiscal deficit. The argument is that business people will reduce their investment spending when they see the government deficit becoming very large because it signals the likelihood of some detrimental future adjustment – either in interest rates, tax rates or government outlays – that will be detrimental for future profits. There is simply no empirical evidence to support this theory compared to Keynesianism 101.

But all this is sideshow in comparison to the lesson of Keynesianism 103.  The fundamental economic point of Keynes’s 1936 General Theory of Employment, Interest and Money was not about fiscal policy or the multiplier or income distribution.  It was about the fact that economic equilibrium (a stable condition from which no economic change would occur without external impetus of some sort) will not necessarily be characterized by full employment. Economists prior to (and some subsequent to) Keynes thought that free market economies would naturally adjust to full employment, as an excess supply of labor would lead to a lowering of wages and a corresponding increase in the amount of employment. Keynes explained that the natural state of a capitalist economy is “unemployment equilibrium,” and without a shock to aggregate demand conditions, there was no reason why the economy would not stay at this unemployment equilibrium. Keynes’s insight implied that the wage reduction strategy was not just theoretically wrong but, if implemented, would likely make the situation worse, since it involved a reduction in household buying power and thus would reduce business confidence.

A prospect as disastrous as the second “dip” that the American economy is about to experience is that of a long period of high unemployment that has no natural tendency to reverse itself. We should not stop our analysis at Keynesianism 101 and 102, since the great social problems facing America are understood best by Keynesianism 103.

So what is to be done? Paul Krugman has been a superb critic of the politicians’ focus on the deficit and the debt rather than on job creation. But he has been relatively quiet about what could be done if in fact the political winds were to shift. Robert Reich has been more explicit. His proposals for job creation include:

1. An additional cut in the payroll tax on employees and employers
2. An increase in infrastructure investment

My guess is that President Obama’s speech this evening will address these issues. If it does, it should be understood as not just a political maneuver, but as a serious attempt to tackle our economic problems.