A third consecutive anemic monthly jobs report Friday from the Labor Department signals trouble for the U.S. economy and could hurt the re-election prospects of President Barack Obama.
Employers added a weaker-than-expected 80,000 jobs in June and the unemployment rate held steady at 8.2 percent, the Bureau of Labor Statistics said.
Consensus economic forecasts had called for growth of 100,000 jobs or higher for the month, given that previous months were thought to have been skewed by weather trends, bad news out of Europe about its debt crisis and statistical adjustments.
Adding to the expectations, a closely watched gauge of private-sector hiring had suggested a day earlier that 176,000 jobs were created in June, setting the bar high for the official government report.
Instead, June looked a lot like May and April, and the three months together combined for a weak quarter in which job growth averaged about 76,000 a month, compared with 226,000 during the first three months of the year.
Since most economists have been forecasting a slower second half of 2012 because of electioneering and a congressional fight over extending expiring tax cuts, there’s little momentum heading into an anticipated rough patch.
And that could prove to be bad news for the president’s hopes for another four years in office.
“In the end, these presidential elections tend to be a referendum on the incumbent president,” said Sarah Binder, a political science professor at George Washington University. “The bulk of voters’ decisions come down to the state of the national economy.” Binder said that even if the economy came roaring back after Labor Day, it might be too late to help Obama.
“Some of it’s already baked in,” she said.
Obama’s Republican rivals wasted little time Friday before pouncing on the weak data.
“Today’s report shows the private sector clearly isn’t ‘doing fine’ and that President Obama’s policies have failed,” House Speaker John Boehner, R-Ohio, said in a statement minutes after the data release.
The jobs report allowed Republican presidential candidate Mitt Romney to change the subject from a series of communications misfires this week over whether Obama’s health care law taxes Americans who lack health insurance.
On vacation with his family in New Hampshire, Romney called the numbers a “kick in the gut.”
“American families are struggling. There’s a lot of misery in America today, and these numbers understate what people are feeling,” the former Massachusetts governor said, adding that “the president’s policies have not got Americans working again.”
Campaigning in Ohio, Obama barely acknowledged the weak numbers. In front of cheering supporters, he highlighted the 4.4 million jobs created on his watch, 500,000 of them in manufacturing.
“That’s a step in the right direction, but we can’t be satisfied,” the president said, pivoting quickly to the campaign’s theme of a choice between visions and of bolstering the middle class.
The job of defending the weak numbers fell to Alan Krueger, the head of the White House Council of Economic Advisers.
“The economy has now added private-sector jobs for 28 straight months,” he said in a subdued statement. “Employment is growing, but it is not growing fast enough given the jobs deficit caused by the deep recession.”
The harsh truth for the White House is this: The average of 76,000 jobs over the past three months amounts to about half the 150,000 monthly new jobs that economists think are necessary to take into account new entrants into the workforce and still knock down the jobless rate.
“The good news is that employment growth is not slowing further, but there is no sign of it picking up either. At this pace, job creation is not fast enough to lower the unemployment rate with the labor force growing at close to 150,000 per month on average,” New York forecaster RDQ Economics said in a research note for investors.
There were a few silver linings in the otherwise forgettable jobs report. Combined private-sector work hours posted their largest gain since February, rising by four-tenths of a percentage point. What that means is employers most likely increased their workers’ hours rather than adding employees.
Within the numbers, the category of temporary help services, often a harbinger of hires in the future, rose by more than 25,000. That suggests employers may be ready to hire when conditions improve.
Most forecasters already were expecting a slower second half of the year, given contentious elections and a nasty fight expected over whether and how to extend the Bush-era tax cuts that are set to expire at year’s end.
“Job growth should pick up in coming months, but I don’t say this with any conviction. Businesses are reluctant to hire, given the still vivid nightmare of the recession and the specter of the European debt crisis and the big decisions the next president will have to make on taxes and government spending,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics. “American businesses are in good financial shape and very competitive, which should shine through with more hiring as these concerns are resolved, hopefully in a reasonably positive way.”
Although weak, the numbers don’t point to a slide back into worse times.
“If the economy were tipping into recession, you would not expect to see the workweek edging higher, temporary jobs rising slightly faster and hourly earnings rising more quickly – all of which happened in June,” Nigel Gault, the chief U.S. economist for forecaster IHS Global Insight, wrote in a research note. “But firms are being very careful about adding new full-time employees. Uncertainties over the strength of global growth, the eurozone crisis, the fiscal cliff and the November elections are giving plenty of reasons for caution.”
The soft hiring fit the narrative that’s been told for months by economists at Bank of America Merrill Lynch, which has projected slower growth than most major forecasters have.
“The economy added 25,000 temporary jobs in June, suggesting that corporations remain cautious and are hesitant to add workers. Payrolls for retail trade fell 5,000, perhaps foreshadowing a slowdown in consumer spending,” Michelle Meyer, senior U.S. economist, said in an analysis of the jobs report. “In addition, the construction sector only added 2,000 jobs, after cutting 57,000 jobs in the prior four months.”
June’s jobs report surely will spark debate again about whether government statisticians are fully capturing hiring, especially among small businesses. That’s because the ADP National Employment Report released Thursday, a gauge of private-sector hiring taken from payroll managers, showed 176,000 new hires during the same period. Most striking, more than half of those – 93,000 – were at small businesses.