Weak jobs report ramps up pressure on debt talks
The unemployment numbers also energize a sparring match between the Obama administration and Republicans over who has policies that deserve voter support in 2012.
Rogelio V. Solis/AP
Attention Washington: The US economy, the top concern of voters, is barely moving.
That's the message that was sent, in essence, by disappointingly sluggish job-market numbers for June, released by the Labor Department on Friday.
Unemployment edged up to 9.2 percent. Job creation was barely visible. The number of people too discouraged to look for work rose, even though the recession officially ended two years ago.
The sobering signals come as President Obama and congressional leaders are heading into high-stakes negotiations over how to control rising federal debt. Plus, elections looming next year could hinge on economic issues.
Weak job numbers could put pressure on both parties to reach a deal that averts uncertainty in the financial markets about whether Congress will raise its cap on federal borrowing. The labor-market malaise could also nudge politicians to take new steps on the economy's behalf, even as it energizes a sparring match between the Obama administration and Republicans over who has policies that deserve voter support in 2012.
“These abysmal numbers underscore the fact that current economic policies are not working," Martin Regalia, chief economist at the US Chamber of Commerce, said in a written comment on the jobs report. "We urgently need to remove impediments to growth and job creation."
The pressure from US business groups was matched by voices of concern from liberal groups and organized labor.
Of course, the trick is for elected officials of differing political stripes to agree on moves to reverse the tepid trend in job creation.
Republicans emphasize keeping taxes low, taming federal debt through spending cuts, and stripping away regulatory barriers to hiring by US firms. Democrats, while often echoing those same concerns, also emphasize the role of government as an investor in the economy, as well as the notion that federal deficits should be closed partly through higher taxes – especially on high-income households.
Some Democrats also say the problem isn't that federal stimulus programs haven't been of benefit, but that more stimulus is needed.
It doesn't help that both parties are angling for the upper hand heading into next year's elections. High unemployment is a negative for Mr. Obama's reelection prospects, and Republicans are pushing the view that the president is standing in the way of job creation.
"The June unemployment report has Americans asking once again: where are the jobs?" House Speaker John Boehner said in a Twitter post Friday. That came after he challenged the White House with a similar question for a town-hall discussion that Obama held on the Twitter network earlier this week.
Despite partisan differences, Obama spoke Friday about several jobs-oriented policies where he said consensus is possible:
• Rebuilding roads, bridges, and other infrastructure, to put unemployed construction workers back on the job while also making needed long-term investments.
• Opening the way for entrepreneurs to use job-creating ideas by streamlining the patent process. "That’s pending before Congress right now," Obama said. "That should pass."
• Extending a payroll tax cut for another year that, Obama said, is putting "a thousand dollars in the pockets of American families."
• Reaching a deal to raise the debt ceiling along with laying plans to bring down future deficits. Such a move could enhance consumer and business confidence, by putting public finances on a stronger footing for the long term.
Although business leaders have criticized Obama on several fronts, notably calling for stepped-up oil production in the United States and a lighter regulatory hand, the action items he outlined overlap with ones advocated by the Chamber of Commerce.
Mr. Regalia of the chamber, for example, cited estimates that three pending free-trade agreements "will not only save 380,000 jobs from being lost to our competitors, but will create thousands of new ones."
Some finance experts say the job market's woes are not prone to quick fixes, even if better policies are put in place.
"There are real structural problems underlying the US economy," says Peter Schiff, CEO of Euro Pacific Capital, an investment firm in Westport, Conn. For years, he says, a consumer economy based on rising debt provided an illusion of economic health.
Now, typical households are having to reduce their debt and save more, and corporations are wary of hiring people without strong consumer demand.
"We have to allow the economy to restructure," Mr. Schiff argues. That would include reduced government spending (to curb dangerous levels of federal debt) and a job-friendly business climate that encourages more US manufacturing. Such moves could boost US exports and bring down the trade deficit with other nations.
One of the most vital steps, many economists say, is simply to avoid an obvious pitfall. It would be very damaging, they say, if the two parties fail to reach an accord to raise the debt ceiling – because it would fan investor concern that the US Treasury may not be worthy of its top-tier credit rating.
Obama and congressional leaders are in talks on a package that would lift the debt cap while also reducing the government's appetite for debt – reducing future federal deficits by as much as $4 trillion over the next decade.
So far, financial markets appear confident that a deal will be reached – whether for $4 trillion or perhaps half that amount – and that the economy will avoid dipping back into recession. The Dow Jones Industrial Average closed at about 12657 Friday, down half a percent.