Hillary Clinton should still be very worried about the economy

The latest job numbers came out Friday out, and somewhat to everyone's surprise, the labor market recovery keeps trundling along. Despite instability on Wall Street, a widening trade deficit, and what looks like a full-blown financial crisis in China, the economy added 292,000 jobs in December, a solid report to cap off a fairly solid year.

Such data has the Democratic Party and the broader center-left crowing over the fact that President Obama is presiding over economic success. At Politico, Mike Grunwald has compiled a lengthy case that actually, times are good in America, and conservatives and cranky leftists (e.g., Bernie Sanders) are out to lunch.

It's true that things are vastly improved from the pits of 2009, and if things can continue on their current path, Hillary Clinton ought to be the odds-on favorite to win in 2016 (that is, if she wins the primary). But liberals should not be complacent about the economic fortunes of average people. They're mediocre at best, and until things have improved a lot more, Panglossian optimism is unwise.

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Let's review. In 2008, the worst recession in 80 years struck. The economy shrank dramatically, and about 8.7 million jobs were lost. The bank bailout, Recovery Act, and unconventional monetary stimulus from the Fed helped the economy, but did not fully reverse the damage. Worse, after 2010 the government undertook a substantial dose of austerity that more or less halted the recovery in its tracks for several years.

The most obvious problem with the American economy is that the damage of the Great Recession has not been fully reversed — and it's not even close. Total economic output is still substantially below where it was projected to be in 2007, and recent growth has been consistently too slow to catch up to the previous trend. Estimates suggest last year alone something like $550 billion in goods and services could have been produced but simply was not.

That weakness is reflected in employment. The percentage of prime working-age people (aged 25-54) with a job dropped from a peak of 80.3 percent in 2007 to a low of 74.8 percent in 2010. Since then, it's increased to 77.4 percent — far better than nothing, but still almost 3 entire points — or roughly 3.75 million jobs — below its previous peak. That weakness has knock-on effects throughout the labor market, as a large unemployed population restrains wage growth. (Grunwald notes that inflation-adjusted wage growth was a respectable 2 percent in 2015, but this was due to a fortuitous collapse in the price of oil, something unlikely to repeat itself).

All this should not obscure the fact that the economy of 2007 was also not a particularly great time for the average citizen. The America of that year, just finishing the weakest economic expansion in postwar history, was still extremely unequal, racked with poverty, and missing a quality welfare state — and then it got smashed by economic calamity.

Some of those things have been addressed to some degree, as ObamaCare has been a qualified success, but others have gotten dramatically worse. Quite simply, American society has largely ceased to function for a small but substantial minority (broadly speaking, the poor), and only just barely works for a much larger group.

Hence I tend to worry that Democratic partisans, together with the goober faction of economists, are effectively normalizing an objectively lousy situation. Claims that everything is fine and dandy are going to ring very hollow indeed in the ears of millions of Americans, and rightly so. What's more, such arguments will also lend support to the Fed's inexplicable decision to raise interest rates, which could conceivably cause a recession in 2016 and throw the election to the GOP.

Until the broadest measures of economic security are at the very least up to 2007 standards, the entire left should continue to push for more stimulus, more jobs, and economic growth. Trumping up weak data Bush Boom-style out of a misguided effort to win a political argument carries a strong risk of backfiring.