Dismal jobs report adds urgency to debt talks, fears for Obama's 2012 campaign

The nation’s economy added a paltry 18,000 jobs in the month of June, a figure far below expectations and one that adds urgency to talks in Washington on raising the nation’s debt ceiling.

The dismal economic news suggests the economy is still struggling to pull out of the deepest recession in decades and raises new questions for the White House in a presidential campaign next year that is expected to be dominated by the economy.

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The unemployment rate crept up to 9.2 percent and has risen .4 points since hitting a post-recession low in March.

Economists had forecast that the economy would add as many as 120,000 private-sector jobs in June, and some had revised forecasts upward after some favorable reports on manufacturing activity and jobs this week.

Instead, the report released Friday by the Bureau of Labor Statistics found employment in most major private-sector industries changed little over the month, while government employment continued to trend down. Private companies added 57,000 jobs, with the overall figure held back by cuts to the federal, state and local government workforces.

The report also showed hourly wages falling, the average workweek shortening and hiring of temporary workers as flat. Numbers for May and April were revised down by 44,000 jobs.

Stocks fell on the news with the Dow Jones Industrial average initially dropping more than 100 points before rebounding in the afternoon. The Dow closed down some 62 points on Friday.


The dismal numbers confirm “what most Americans already know: We still have a long way to go and more work to do,” President Obama said in remarks from the Rose Garden.

He urged Congress to move three pending trade deals and to extend a payroll tax reduction that has been discussed as part of deficit-reduction packages being negotiated.

“Our economy as a whole just isn't producing enough jobs for everyone who's looking,” he said.

The president is scheduled to meet with congressional leaders at the White House on Sunday evening to discuss the debt talks.

Doubts over whether Washington can achieve a deal that prevents a U.S. default and puts the U.S. in better fiscal order have contributed to economic uncertainty and a lack of hiring by U.S. companies.

While firms have stopped laying off workers, they have done little hiring to fill the nearly 9 million jobs lost during the recession.

Republicans have repeatedly attacked Obama’s policies for stalling the economic recovery.

Rep. Michele Bachmann (R-Minn.), a GOP presidential candidate, called the figures “stunningly bad” in comments on CNBC shortly after the Labor report's release. She said the figures were bad for Obama politically, but even worse for the economy.

Obama said he would continue to work with members of both parties to cut the deficit and raise the debt ceiling in an effort to give markets more certainty and grow the economy.

Nothing in the report is good news for a White House that hoped the economy would be recovering more by now, though Obama's senior political adviser David Plouffe earlier this week predicted voters would not cast their 2012 ballots based on where the jobless rate stands, but on whether they think their economic situation is improving.

The report could add urgency to including measures like extension of the payroll tax cut in the debt talks.

Obama and Speaker John Boehner (R-Ohio) are pressing for a big deficit-reduction package that could include steep spending cuts, entitlement reforms and changes to the tax code.

Democrats are pressing for the elimination of special tax breaks, but Republicans have warned this could stall the economy.

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House Majority Leader Eric Cantor (R-Va.) and other Republicans said the weak report was a reason to oppose any tax hikes.

“Look at these job numbers,” Cantor said. “I would ask the other side: Do they think now’s the time to raise taxes on small businesses and families? They’ve got to be kidding if they think now’s the time to raise taxes.”

A senior economic adviser to Obama said Congress should enact several measures to help the private sector.

Austan Goolsbee, the chairman of the Council of Economic Advisers, said Congress should extend the payroll tax cut, approve several pending free trade agreements stuck over a battle over a worker assistance program, and create an infrastructure bank to help put Americans back to work.

Goolsbee also said the report showed the need for a balanced approach to deficit reduction "that instill confidence and allows us to live within our means without shortchanging future growth."

This story was initially posted at 8:32 a.m. and last updated at 4:00 p.m.