High gas prices are eating into the economic recovery, diminishing the political boost President Obama has received from the killing of Osama bin Laden.
A range of polls show Obama’s approval rating has jumped, but the president continues to get dismal ratings for his handling of an economy dragged down by gas prices, which averaged $3.98 across the country on Wednesday, according to AAA.
The high gas prices limited gross domestic product growth in the first quarter, and have taken a bite out of jobs, the most important economic indicator for the White House.
ADP Employer Services reported private firms added 179,000 jobs in April, fewer than the 200,000 expected. The Dow Jones Industrial Average initially dropped more than 100 points on the news before recovering some of those losses by the end of the day.
Economist Mark Zandi of Moody’s Analytics projects private business will add 180,000 jobs when the Bureau of Labor Statistics releases its monthly report on Friday, with total gains only 160,000 because of lost local and state government jobs.
While the creation of 160,000 jobs is nothing to sneeze at, it’s not enough to significantly lower the unemployment rate, since the economy has to create about that many jobs to keep up with population growth.
The biggest drag on the economy, Zandi says, are gas prices, which have basically wiped out any benefit for middle-class families from the payroll tax cut included as part of December’s deal to extend the Bush tax rates.
“The higher gas prices act like a pernicious tax increase on the economy,” Zandi wrote in an email to The Hill. “Consumers are literally taking their payroll tax cut and putting it into their gas tank.”
A CBS/New York Times poll released Wednesday found that 57 percent of those surveyed approve of Obama’s job performance, up by 11 points since a mid-April poll. The jump almost certainly reflects the killing of bin Laden, which set off spontaneous celebrations in front of the White House and in Times Square.
Just 34 percent of those surveyed in the poll said they approved of Obama’s handling of the economy, the lowest point on that question in that poll since he took office. Fifty-five percent disapprove.
Zandi said he’s hopeful prices have peaked, and some fuel analysts think they have just about topped out.
“I think we’re very close to a peak in gasoline prices right now,” said Sander Cohan, a fuels analyst at Energy Security Analysis.
His firm expects crude prices to peak in May, and to gently decline over the summer as refiners add supply to the market and increased demand over the summer fails to materialize.
Consumers already are making changes in their behavior because of the prices, and Cohan expects the number of gallons consumed this summer won’t hit the peaks of years past.
“It won’t be a crash, more like a slow fizzle,” Cohan predicts.
An administration hoping the bin Laden bounce doesn’t also fizzle will be hoping gas prices have, indeed, peaked.