Job Weakness Starts to Shape Election Tone
Jae C. Hong/Associated Press
Job seekers have their resumes reviewed at a job fair in Anaheim, Calif.
Published: July 6, 2012 759 Comments
It is increasingly apparent what the economy will look like when
President Obama faces voters in November: pretty much what it looks like
today.
Multimedia
Change in jobs,
in thousands
in thousands
Source: Bureau of Labor Statistics
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Charles Dharapak/Associated Press
“America can do better,” Mitt Romney said in New Hampshire on Friday.
Readers’ Comments
Readers shared their thoughts on this article.
And that picture, a report from the Labor Department
made clear on Friday, is far from the booming job growth that prevailed
only a few months ago. In June, the economy added a meager 80,000 jobs,
and the unemployment rate remained at 8.2 percent.
Early this year, optimists buzzed that the jobless rate might touch
below 8 percent by the election, a milestone that would be a major
symbolic victory for the incumbent. Then employment growth slowed in
March and took a turn toward the paltry in April and May.
With Friday’s report, what looked like a blip has now become a streak.
And with a gridlocked Congress unlikely to pass any additional stimulus
measures before the election, the president is stuck again with an
economy in stall mode.
June’s job growth, after a revised increase of 77,000 in May, was just
about enough to keep up with population growth, but not nearly enough to
reduce the backlog of 13 million unemployed workers.
Economists have scaled back their expectations for the rest of the year and are now forecasting continued sluggishness.
“This economy has no forward momentum and little help from monetary or
fiscal policy,” said Kathy Bostjancic, director of macroeconomic
analysis for the Conference Board. “As if that were not enough, ill
winds are blowing in from both a contracting Europe and slowing growth
in emerging markets.”
Friday’s report also put a chill on financial markets, sending stocks sharply lower on both sides of the Atlantic.
At a campaign stop in Poland, Ohio, on Friday, Mr. Obama urged voters to take the long view, and to be mindful of the economic state he inherited.
“I want to get back to a time when middle-class families and those
working to get into the middle class have some basic security,” he said.
“We’ve got to deal with what’s been happening over the last decade, the
last 15 years.”
Mr. Romney, on the other hand, emphasized the more recent string of weak job growth that has taken place under Mr. Obama’s leadership.
“This is a time for Americans to choose whether they want more of the
same,” Mr. Romney said from Wolfeboro, N.H., where he is vacationing.
“It doesn’t have to be this way. America can do better. And this kick in
the gut has to end.”
The recent string of weak employment growth may work to political advantage for Mr. Romney.
From December through February, private companies added an average of
252,000 workers a month. But job growth slowed in March, leading some
economists to wonder whether the unseasonably warm winter, rather than a
fundamentally healthier economy, had been the real source of the
short-lived employment surge.
“The net of it is not as if the economy is collapsing, but it wasn’t
really as strong as it looked in December, January and February,” said
Jim O’Sullivan, United States economist at High Frequency Economics.
The numbers themselves are also adjusted by season, and these
adjustments themselves can be imprecise and open to interpretation.
By June, in any case, the payback from the unusually warm winter should
have faded, indicating that the slowdown may reflect more serious
underlying problems in the economy, Mr. O’Sullivan said.
One of the few industries with decent job growth was temporary help
services, suggesting that employers were not confident enough of the
recovery’s sustainability to invest in permanent hires even if their
order books were currently growing.
Among the few bright spots in Friday’s report were ticks upward in
average hourly earnings (to $23.50, from $23.44 in May) and the length
of the typical private sector workweek (34.5 hours, from 34.4). Still,
the overall weakness in the report may have nudged Federal Reserve
officials toward additional monetary stimulus.
“The odds of QE3 happening before the election are clearly going up,”
said Jay Feldman, an economist at Credit Suisse, referring to the
nickname for a third round of stimulus known as quantitative easing.
The Fed has been reluctant to inject more money partly because it has
been hard to determine whether additional monetary stimulus is either
effective or even needed
Since the recovery officially began in June 2009, there have been
several spates of promising job growth, which raised hopes of a
strengthening recovery that were ultimately dashed. Each time economists
attributed the hiring slowdown to one-time negative shocks, including
last year’s tsunami in Japan and the Arab Spring uprisings.
Multimedia
Change in jobs,
in thousands
in thousands
Source: Bureau of Labor Statistics
Related
-
Economix Blog: Who's in Charge of Fixing This? (July 6, 2012)
-
Economix Blog: Another (Seasonally Adjusted) Slowdown (July 6, 2012)
-
Economix Blog: Reaction to June Jobs Report, in Tweets (July 6, 2012)
-
Stakes for Jobs Figures Rise as Voters’ Views Start to Solidify (July 6, 2012)
Related in Opinion
-
Taking Note: Another Dismal Jobs Report, Another Misguided Attack from the Right (July 6, 2012)
-
Editorial: The Square Off Over Jobs (July 7, 2012)
Readers’ Comments
Readers shared their thoughts on this article.
A healthier economy might have been able to withstand such shocks
easily, but not one weakened by a debt overhang and a sea of underwater
homes.
“At this point, expectations are pretty low, so anything that is moving
the job market in the right direction would be welcome,” said Sophia
Koropeckyj, managing director at Moody’s Analytics.
Economists worry that even modest acceleration in job growth could be
derailed by additional shocks both abroad and at home.
Corporate profits fell in the first quarter of 2012,
the first decline since 2008, the Commerce Department reported last
week. The overall drop was entirely because of falling profits abroad.
While there are challenges across the developing world, including China,
the primary foreign drag on the American economy is still coming from
Europe’s protracted sovereign debt crisis.
“When you factor in the effect on U.S. trade, financial markets and
credit availability, the Europe crisis is probably taking a percentage
point off of U.S. growth,” Andrew Tilton, a senior United States
economist at Goldman Sachs, said of Europe’s impact on America’s gross domestic product.
There are plenty of homegrown risks, too.
Struggling local governments have been shedding workers.
There was a brief respite in June, but economists generally seem to
expect the layoffs to pick up again for the rest of the year.
Under current law, the end of 2012 will also bring a torrent of federal tax increases as the Bush tax cuts and temporary payroll tax
reductions expire. The government is also scheduled to lop off a huge
chunk of federal spending because of measures set in motion by
Congress’s inability last December to come up with plans for longer-term
fiscal restructuring.
In addition to those components of the so-called fiscal cliff, the
federal extension for unemployment benefits ends this year, meaning
that, in most states, newly unemployed workers will receive no more than
26 weeks of jobless benefits, according to the National Employment Law
Project.
Without extended jobless benefits, unemployed workers will have less
disposable income, cutting their spending, and reducing employers’ need
to hire more workers.
“A lot of companies are not too clear about how all these policy issues
are going to affect their bottom line,” Ms. Koropeckyj said.
“Ultimately, demand determines what companies are going to do in the
longer run in terms of hiring. But in the short run, companies are going
to try to hold off as much hiring as long as possible.”