August 3, 2012
A sluggish economy often sends out contradictory signals, but the conflicting messages flashing from Friday’s unemployment report are perhaps the wild card that will shape the outcome of the November presidential election.
The 163,000 jobs added in July reinforces President Obama’s long-standing message that the United States is undergoing a slow yet steady recovery from the worst financial catastrophe since the Great Depression. Obama is just 316,000 jobs away—possibly just three months of payrolls increasing by an average of 106,000—from being able to claim the number of workers grew under his watch instead of shrinking.
But the unemployment rate—the most popular economic metric with voters—ticked up last month by a tenth of a percentage point to 8.3 percent, strengthening Republican challenger Mitt Romney’s argument that the president’s policies have failed.
“Today's increase in the unemployment rate is a hammer blow to struggling middle-class families,” Romney said in a statement. “President Obama doesn’t have a plan and believes that the private sector is ‘doing fine.’ Obviously, that is not the case. We’ve now gone 42 consecutive months with the unemployment rate above eight percent.”
Unfortunately, the fine print in the Bureau of Labor Statistics analysis doesn’t translate well into political sound bites. The report beat dour expectations from Wall Street, with the rising unemployment largely the result of differences in rounding. Stocks surged on the report, with the Dow Jones Industrial Average jumping 251 points, or 1.95 percent, to 13,129 in early Friday afternoon trading.
Furthermore, the economy has recently been weighed down by government layoffs as the private sector has cautiously hired new workers. Federal, state and local governments shed 9,000 jobs last month, a number likely to become much more devastating due to the upcoming budget cuts imposed by sequestration or alternative reductions that would be negotiated by Congress and the White House.
The unemployment rate rose from 8.217 percent in June to 8.254 percent, just enough to be rounded up in a way that fuels Republican criticism. Rather than a worsening jobs picture last month, the rate was “essentially unchanged,” said the bureau’s acting commissioner John Galvin.
For voters accustomed to blunt messages in speeches and television ads, that nuance is easy to miss. And even if the situation isn’t as bleak for Obama as indicated by the rounded-up figure, it’s still pretty terrible. No president has been reelected since 1948 with unemployment above 7.2 percent.
What the Obama team emphasizes instead is the continuing improvement in manufacturing. Factory jobs grew by 25,000 last month, more than half of which came from an auto sector that avoided its customary summer layoffs. Those figures will appear on the campaign trail as Obama and Vice President Joe Biden praise their decision to rescue General Motors and Chrysler, while pushing for additional policies to ramp up more assembly lines across the country.
“To continue the revival in manufacturing jobs and output, President Obama has proposed tax incentives for manufacturers, enhanced training for the workforce, and measures to create manufacturing hubs and discourage sending jobs overseas,” blogged Alan Krueger, chairman of the Council of Economic Advisers.
Such celebrations of the motor-vehicle industry could be short-lived.
Factory orders fell by 0.5 percent last month, the government said Thursday. And auto sales are similarly decelerating, with revised figures from Autodata Corp. showing a drop-off of annualized purchases from 14.4 million in June to 14.3 million in July.