Another Blow for the Economy

by Pejman Yousefzadeh on July 6, 2012

More bad news on the jobs front:

The U.S. economy created just 80,000 jobs in June and the unemployment rate held steady at 8.2 percent, reflecting continued slow growth in the economy with the presidential election just four months away.

The Bureau of Labor Statistics said private payrolls increased 84,000, while the government lost 4,000 jobs. Economists expected job growth of about 100,000 and the unemployment rate to be unchanged, though many had increased their forecasts based on some recent indicators.

With yet another month of weak employment growth, the second quarter marks the worst three-month period in two years. The period averaged just 75,000 per month, against 226,000 in the first quarter, which benefited from an unusually mild winter.

May’s weak initial 69,000 report was revised upward to 77,000, which made the June growth essentially the same. The April number was revised lower, from 77,000 to 68,000.

“What a disappointing number,” said Jeff Savage, regional chief investment officer for Wells Fargo Private Bank. “This was kind of disastrous. We’re not even keeping up with demographics at this point. This is not going to be liked in the markets.”

And the response from 1600 Pennsylvania Avenue? President Obama said that the jobs numbers represented “a step in the right direction.” To be sure, he also said that he wanted faster jobs growth, but this White House appears to be missing the point. A mere 80,000 jobs created doesn’t amount to a step in the right direction, when hundreds of thousands of jobs a month need to be created in order to get the employment market back into fighting shape. As things stand, filings for disability are outpacing jobs growth. And let’s not forget that the administration promised us that passage of the stimulus bill back in 2009 would bring unemployment down to 5.6%. It remains stuck at 8.2%. And consider:

– If the size of the U.S. labor force as a share of the total population was the same as it was when Barack Obama took office—65.7% then vs. 63.8% today—the U-3 unemployment rate would be 10.9%. Even if you take into account that the LFP should be declining as America ages, theunemployment rate would be 10.5%.

– The broader U-6 unemployment rate, which includes “all persons marginally attached to the labor force, plus total employed part time for economic reasons,”  is 14.9%, up a bit from May.

– The average duration of unemployment ticked up to 39.9 weeks.

– It will take 219,000 net new jobs a month for unemployment rate to be below 8% on Election Day if current participation rate holds steady.

– Job growth during the three-year Obama recovery has averaged just 75,000 a month for a total of 2.7 million. During the first three years of the Reagan Recovery, job growth averaged 273,000 a month for a total of 9.8 million. If you adjust for the larger U.S. population today, the Reagan Recovery averaged 360,000 jobs a month for a three-year total of 13 million jobs.

These numbers should scare anyone. The fact that the president considers all of this “a step in the right direction” shows that his out-of-touch statements about the private sector “doing fine” were no fluke. Barack Obama really doesn’t get how bad things are out there.

Of course, we know how the Obama campaign will react to all of this. They will tell us that we ought to be more concerned about what Mitt Romney does with his money than with what Barack Obama is doing with ours. How that will get anyone a job, help anyone keep his or her house, put food on the table for millions of families, help households make ends meet, and assist parents working to ensure that their kids can afford college is anyone’s guess.

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