State of the Union: What Obama Can and Can't Brag About

President Obama will deliver his final State of the Union address tonight. With Republicans in control of Congress, the administration's chances of passing any serious legislation in its last year look pretty dim. As a result, the President has suggested he will mostly do away with the traditional laundry list of policy proposals and use his bully pulpit to burnish his legacy—essentially making the case to America to keep a Democrat on Pennsylvania Avenue for four more years.

The economy, which President Obama took over in the midst of the worst financial crisis since the Depression, isn't going to be the only thing he talks about. But it's certain to be central to his case. From unemployment to the stock market, there's a lot to brag about. But it's not going to be as simple as declaring victory and dropping the mike. (Not that Republicans would ever let you think it was.)

If most Americans are feeling at least a little better off than they were seven years ago, for many of us that isn't saying much. The financial crisis was a uniquely painful event and the recovery has been slow and fitful. So what can the President legitimately brag about tonight, economy-wise, and what areas is he likely to gloss over? Here are four key areas of the economy, and the progress (or lack thereof) that we've made so far.

Jobs

When it comes to jobs, the State of the Union couldn’t come at a better time. “If I were the president, I would focus on jobs like a laser beam,” says Moody’s Analytics chief economist Mark Zandi.

Just last week the Labor Department released a knock-out jobs report, which confirmed that the past two years' of jobs growth was the best the U.S. has enjoyed since the late 1990s. Meanwhile unemployment held steady at a healthy 5%—a rate economists typically see as low enough that most job seekers can easily find work, but not so low that it risks sparking hard-to-contol inflation. And it's half the peak 10% rate that Americans endured during Obama's first year in office.

But not all corners of the job market are doing equally well. Most of the growth has come in sectors like healthcare, which added about 40,000 jobs a month over the past year, and “professional and business services”—think accountants and lawyers—which added 50,000 a month.

Other areas are still hurting. One thing President Obama is almost certain to tout is the auto industry bailout—not least because automakers recently announced record vehicle sales for 2015. But even that controversial effort wasn't able to stem the difficult story of U.S. manufacturing over the past decade. There are about 12.3 million U.S. manufacturing jobs today. That's up from about 11.4 million in 2010, but well below the 13.7 million that existed at the time of Obama's election.

Wages

Another weak spot is wages. Even with the economy creating tens of thousands of jobs each month, millions of us lucky enough to be pulling in a steady paycheck still aren't getting ahead. There has been some modestly good news on this front: Wage growth recently ticked up to about 2.5%, above the 2% level where it's spent much of the Obama presidency. But that's still well below the 4% most Americans who worked through the '80s and '90s are used to, meaning many Americans are basically treading water. "People aren’t necessarily feeling it the way they typically would in an expansion that’s seven years along," says Sam Bullard, senior economist at Wells Fargo Securities.

What's more, as with jobs, gradual national improvement hides a very mixed picture—and a lot of frustration for ordinary Americans. The share of income going to the wealthiest Americans has been growing since long before Obama took office. But issues such as runaway pay for chief executives and hedge fund managers rankle with a lot more of us, at a time when middle-class incomes, up about 8% since Obama between 2008 and 2014 compared to 13% for top earners, are limping along.

For those who are left behind, it's not just a matter of envy. Research shows that graduating from college into a recession can depress wages for years to come. And pessimistic economic prospects have even been blamed for rising death rates, driven by suicides and substance abuse among less educated middle-aged whites.

Housing

Many Americans who weren’t directly snared by the housing crisis—stuck with foreclosures or short sales—have seen the value of their homes recover. Prices in boom towns like Denver and San Francisco are well above their pre-financial crisis peaks. And even less trendy locales like Pittsburgh, Buffalo, and San Antonio have more than made up their lost ground.

After big strides in 2012 and 2013, economists expect steady-but-not-spectacular low single-digit home price increases this year. But as with other areas of the economy, the recovery has been uneven. Overall, the value of the nation's homes still haven't gotten back to where they were. Real estate data company Zillow put the total value of the nation’s housing stock at $28.5 trillion at the end of last year, about $800 billion below its 2006 peak. Parts of Florida, California, and Arizona remain 30% to 40% below prices seen at the height of the mania. Las Vegas is still 50% below, according to HSH.com.

Read Next: How to Negotiate the Best Price for a House in 2016

Home values aside, the difficult road back from the housing crisis interrupted the lives of millions of young Americans who might otherwise have been buying homes and starting families. As a result, home ownership, once regarded as a cornerstone of the American dream, continued to decline throughout the Obama presidency. One recent Harvard University study found home ownership rates among the hard hit Generation X age cohort had fallen to a level "not seen since the 1960s."

Investments

No one knew it at the time, but the stock market reached its low point in March 2009, just weeks after Obama took office. Since then it’s tripled in value, counting dividends. Indeed, for any investor who remembers those stomach-churning days, it's hard not to see yourself as better off in 2016. But even that success comes with caveats.

For starters many of us aren't investors. Only about 55% of Americans even own stocks, according to a recent survey by Gallup. (The rate peaked at about 65% in 2007.) So while those of us with 401(k)s may be cheering, the market's gains are pretty cold comfort for nearly half the country.

What's more, the stock market's bull run doesn't purely reflect investors' rosy views of the economy. The market's gotten a big, artificial boost from the Federal Reserve's recent decision to buy tens of billions in bonds in an effort to depress interest rates and prop up the value of financial assets, creating what some have termed a "wealth effect." In other words, the stock market's gains at least partly reflect a deliberate strategy by policy makers to drive up prices, making people feel wealthier, so they will invest and spend more.

The strategy may have worked, but arguably helped make the rich richer (after all, they own the most stocks) at the expense of many older investors who rely on bond and pension income and have been suffering from ultra-low interest rates.

It also means the stock run up has taken place despite the fact that corporate earnings don’t necessarily support such lofty values. Lately U.S. stocks have been trading about 24 times their average earnings over the past decade, compared to an historical average of about 16 times, suggesting they have run ahead of the rest of the economy. Investors shouldn't expect to see gains like the ones they've enjoyed over the past several years again anytime soon.

Here's the Economic Stuff Obama Can—and Can't—Brag About

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