By Ian Swanson - 08/08/12 09:00 AM EDT
July’s job figures confirm the U.S. economy is running in place, a troubling sign for President Obama’s reelection hopes.
While the monthly job figures have jumped up and fallen back down, growth in the United States has been remarkably consistent — and weak — for the last 19 months.
The poor figures show an economy adding jobs very slowly, and not at nearly a quick enough pace to lower the nation’s jobless rate, which ticked up to 8.3 percent in July.
“I think it still all comes down to demand,” said Heidi Shierholz, a labor expert at the Economic Policy Institute.
While July’s employment report beat expectations, she said it becomes more distressing the more it is examined.
“We’re just holding steady at crisis levels,” she said. “It’s the same thing we’ve been seeing.”
Gains of 150,000 per month are barely enough to keep up with population growth, and they suggest a corresponding drop in the unemployment rate is a bit misleading.
Unemployment has dropped from 9.1 percent in January 2011 to 8.3 percent now, boosting the Obama campaign’s argument that the administration’s policies have helped the nation lift itself up from the Great Recession that began more than four years ago.
But much of the drop in the unemployment rates comes from workers leaving the workforce.
The percentage of workers in the civilian labor force in January 2011 was 64.2 percent. In July, that had dropped to 63.7 percent.
A portion of this decline is the retirement of the baby-boom generation, which will slowly transform the country’s demographics and eventually will make it even harder for the nation’s economy to grow, given the expected surge in entitlement spending. Another part of the decline comes from workers who have simply given up on the search for a job because of the difficult labor market.
The U-6 rate, which counts workers who are neither working nor looking for work but want a job, as well as some part-time workers, hit 15 percent in July.
Campaign arguments from both President Obama and GOP rival Mitt Romney center on the employment figures.
Romney says they provide the evidence the president’s policies are failing. The 2009 economic stimulus package did not boost the economy, and Obama’s pursuit of a healthcare law, financial reform and higher taxes on businesses and wealthier households is holding back investment in the economy, the Republican argues.
Non-financial corporations hold $1.7 trillion in assets they are not re-investing into workers and infrastructure, according to a report in Reuters last month. Romney argues this money is on the sidelines in part because of uncertainty driven by Washington.
Romney and other Republicans also argue more money could be pumped into the U.S. economy if profits made abroad were allowed to be repatriated to the United States at a lower tax rate instead of the 35 percent tax they’d be hit with now. Obama’s Treasury Department opposes a repatriation holiday.
Obama’s campaign argues the president’s policies have helped the nation survive the worst economic downturn since the Great Depression. Obama’s stimulus and his support for the auto industry have led to more than two years of steady job gains.
Team Obama argues Romney would return the country to the policies that started the financial crisis, and hopes voters will feel good enough about the direction of the country to reward the president with another four years in office. No president since Franklin Roosevelt has won a second term with unemployment above 8 percent.
While national polls have Romney and Obama in a dead heat, the president looks to have an advantage when swing-state polling is considered.
Still, there are a couple economic reasons to think this could change in the next few months.
The first is fatigue. The battle over who is best for the economy is taking place four years after the financial crisis. Few voters feel much confidence in the economy and their government today.
Another problem for the president is gas prices, which are rising. The price at the pump has yet to reach the nearly $4 per gallon level of spring, but they have gone up steadily in July and August, with the height of the hurricane season around the corner.
Looking for a plus for the president? How about the possibility that the Federal Reserve could take action in September to boost the economy?
Speculation is rising that the Fed will take action in September, and that’s led to a rise in stock prices, with the S&P closing above 1,400 for a time on Tuesday. The president of the Federal Reserve branch in Boston on Tuesday called for aggressive bond-buying by the central bank.
This wouldn’t be an October surprise, but it could seal the deal for Obama despite the bad economic times. Few presidents lose reelection when markets rise in the three months prior to Election Day.