http://www.nytimes.com/2012/07/07/bu...pagewanted=all
It is increasingly apparent what the economy will look like when President Obama faces voters in November: pretty much what it looks like today.
“America can do better,” Mitt Romney said in New Hampshire on Friday.
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.
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.”
In other words, until Romneyfication.
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