More news on the economy that isn’t good for those who are struggling, or President Barack Obama and his re-election campaign:
American employers added just 96,000 jobs in August, the Labor Department reported Friday. The unemployment rate fell to 8.1 percent as the economy slogged along for the 43rd month in a row with joblessness above 8 percent.
Economists had expected an addition of 125,000 total nonfarm jobs in August, and the unemployment rate to be unchanged at 8.3 percent. The unemployment rate declined in August by two-tenths of a percent because more people left the labor force, suggesting the unemployed are discouraged in their efforts to find jobs.
“Some workers who have exhausted their unemployment benefits or remained jobless for a more than half a year gave up their search for work and dropped out of the workforce,” said Brookings Senior Fellow in Economic Studies Gary Burtless.
Peter Morici, economist and professor at the University of Maryland’s Smith School of Business, said the jobs added were “not nearly enough to keep pace with population growth.”
In a newsletter, Morici said the jobs lost in manufacturing and temporary help raise “concerns that the recovery is sputtering and a recession is eminent.”
He said the report “will likely spur the Federal Reserve to take additional measures to lower interest rates but with interest rates at record lows, such action will have limited positive effects.
Payrolls rose less than projected in August and the unemployment rate was unexpectedly driven down by Americans leaving the labor force, boosting the odds of additional Federal Reserve easing to spur a faltering recovery.
The economy added 96,000 workers after a revised 141,000 increase in July that was smaller than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for a gain of 130,000. The jobless rate fell to 8.1 percent.
Treasuries and gold rose on bets the figures make it more likely Fed policy makers will expand record monetary stimulus next week after Chairman Ben S. Bernanke called unemployment a “grave concern.” The report also dealt a blow to President Barack Obama one day after he accepted the Democratic Party’s nomination for a second term.
“This is definitely a setback for the labor market and the economy,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York and former economist for the Fed. “This clearly validates Bernanke’s concern. We have Europe, the fiscal cliff, and it is a generally cautious business environment.”
The yield on the 10-year Treasury note, which moves inversely to price, fell to 1.62 percent from 1.68 percent late yesterday. Gold futures for December delivery climbed 1.5 percent to $1,731 an ounce on the Comex at 11:54 a.m. in New York. The Standard & Poor’s 500 Index rose 0.3 percent to 1,435.75.
Employers may be reluctant to expand headcounts as they face a global economic slowdown and the so-called fiscal cliff, the $600 billion of tax increases and spending cuts that will take effect automatically at the end of the year unless Congress acts.
Are these new numbers likely to change the Presidential race? Jonathan Berstein, writing in the Washington Post, doesn’t think they will:
To be sure: this month’s numbers are a bit more important to the presidential race than last month’s, because as many have said a dramatic number could have affected the postmortem coverage of the party conventions. That is: we simply are going to have more than the usual amount of presidential election news coverage over the next few days, and normally inattentive voters are still triggered by the conventions to focus on politics a bit more than they usually do. So anything that affects the tone of that coverage could have some effect. However, especially with the reported unemployment rate falling, it’s unlikely that this report is bad enough to really change the way reporters and pundits see the Charlotte and Tampa meetings. Of course, some will overreact, but overall, the tone of the media coverage won’t change enough to make a difference.
Now, continuing weakness in the jobs market may spur the Federal Reserve to take further action, which in turn could mean some much-needed help for those who are hurting, but it’s increasingly less likely that any effects could show up until after the election (although the already-healthy stock market could be further helped by Fed action). The truth is that the economic context of the election is pretty much set in stone by now: a recovery, but not a particularly lively one. And today’s jobs report just doesn’t change that, no matter how many times people claim the contrary.
What the political science models tell us is that those economic circumstances point to a close race, with perhaps a slight advantage for the president (depending on which model you look at). Which in turn means that campaign-level factors, from the quality and frequency of ads to get-out-the-vote operations to, yes, the effects of the conventions, could all be important. The bottom line of today’s jobs report is mainly just to keep that dynamic in place.
Clearly, not everyone feels that way.
Joe Gandelman is a former fulltime journalist who freelanced in India, Spain, Bangladesh and Cypress writing for publications such as the Christian Science Monitor and Newsweek. He also did radio reports from Madrid for NPR’s All Things Considered. He has worked on two U.S. newspapers and quit the news biz in 1990 to go into entertainment. He also has written for The Week and several online publications, did a column for Cagle Cartoons Syndicate and has appeared on CNN.