By DAVE CLARKE and LAUREN FRENCH | 9/7/12 8:37 AM EDT Updated: 9/7/12 1:43 PM EDT | Politico
New jobs numbers released on Friday came in lower than expected, dealing a blow to President Barack Obama’s reelection campaign a day after the president closed out the Democratic National Convention in Charlotte, N.C., by asking voters to give his administration four more years to get the economy on the right track.
Republicans jumped all over the disappointing report and the new numbers threaten to dampen the enthusiasm Democrats hoped to build among voters following this week’s convention where they promoted Obama’s economic plan as the only one that will put people back to work.
“After the party last night, the hangover today, the jobs numbers were very disappointing,” Republican presidential candidate Mitt Romney said Friday at a news conference in Sioux City, Iowa. “There’s almost nothing the president has done in the past three and a half, four years that gives the American people confidence that he knows what he’s doing when it comes to jobs and the economy.”
The economy added 96,000 jobs in August, pushing unemployment down to 8.1 percent, the Labor Department reported Friday.
The jobs figure missed most mainstream forecasts for August, with analysts’ predictions hovering around 125,000.
The White House downplayed the report noting that the jobs numbers can be volatile on a month to month basis.
“While there is more work that remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression,” Alan Krueger, chairman of the Council of Economic Advisers, said in a statement. “It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007.”
The drop in the unemployment rate from 8.3 percent to 8.1 percent serves as somewhat of a silver lining for the Obama campaign but it was mostly due to more workers leaving the labor force.
Attention now turns to whether the Federal Reserve will take new steps to juice the economy when its policy setting committee meets next week.
Several economists and analysts on Friday said the new jobs report will lead the U.S. central bank to act.
Harm Bandholz, a chief U.S. economist at UniCredit Research, called a new round of Fed stimulus a “done deal.”
“If the doves needed any further proof that more policy stimulus is warranted, today’s employment report brought it,” Bandholz said.
Republicans have said the Fed should hold its fire because further action could lead to inflation even though, so far, there is little evidence that is a looming threat.
Romney on Friday questioned whether new actions by the Fed would have any impact on the economy.
“Frankly, I think they’ve shot a lot of their monetary bullets and those bullets aren’t able to strike at a target that makes a real difference for the American worker today,” Romney said in an interview with Fox News on Friday. “What we really need is to have policies coming from Washington that are fiscally sound and that get America back on track to having the kind of financial stability and foundation of economic growth that puts people to work.”
Obama asks for more time
In his speech Thursday night, Obama made his case for a second term by arguing his plan for improving the economy needs more time given the problems the country faced when he took office in the midst of the financial crisis.
“You didn’t elect me to tell you what you wanted to hear. You elected me to tell you the truth,” he said in his speech to the convention. “And the truth is, it will take more than a few years for us to solve challenges that have built up over decades.”
Republicans have made the high unemployment rate a centerpiece of their campaign against Obama saying the economy should be in much better health by now following a recession that ended in 2009.
“This is not even close to what a recovery looks like,” Republican vice presidential candidate Paul Ryan said Friday on CNBC’s “Squawk Box.” “This is not what President Obama promised. I would argue this is the result of failed leadership in Washington, bad fiscal policy coming from the administration, and that is why we have this very tepid report.”
Democrats accuse congressional Republicans of ignoring recent Obama proposals to help the economy through increased infrastructure spending and providing money to states.
“While our recovery is still moving too slowly for many Americans, job growth would likely have been even stronger if Republicans had not blocked Democratic efforts to hire more teachers, firefighters and police officers,” Senate Majority Leader Harry Reid said in a statement.
Republicans again said on Friday that they see these policies as retreads of earlier proposals they contend did not work following the recession.
“We need a president and a Senate with the courage to let go of the failed ‘stimulus’-style policies of the past and work with Republicans on proven pro-growth measures to tackle our debt, address high prices, and create a better environment for jobs,” House Speaker John Boehner said in a statement.
On Thursday night, Obama argued that Romney and congressional Republicans are not offering up ideas that can help the economy and instead are falling back on policies put in place in the lead up to the recession.
“All they have to offer is the same prescription they’ve had for the last thirty years,” he said in Charlotte. “Have a surplus? Try a tax cut. Deficit too high? Try another. Feel a cold coming on? Take two tax cuts, roll back some regulations, and call us in the morning.”
The economy typically requires between 100,000 and 125,000 new jobs per month to keep pace with new workers entering the labor market.
On average in 2012, the economy is adding 139,000 jobs per month, according the Labor Department’s Bureau of Labor Statistics. In 2011, that figure was 153,000.
Labor also revised its July jobs figure to 141,000 down from its initial figure of 163,000 jobs.
Two more monthly jobs reports will be released before the election with the October numbers arriving on November 2.
The initial reaction from economists and analysts is that there is little positive in the August report.
“The biggest miss… I think in the data and the expectations was manufacturing,” Mark Zandi, chief economist of Moodys Analytics said on MSNBC. “We lost, I believe, 15,000 manufacturing jobs. Expectations were for a gain… manufacturing has been steadily improving for almost three years.”
Investors reaction was muted with the Dow Jones Industrial Average closing up almost 15 points for the day.
Spotlight on the Fed
When it comes to the fate of the economy over the next few months, the heated rhetoric of the campaign serves mostly as background noise. The real game is being played by central bankers in the United States and Europe.
On Thursday, the European Central Bank announced plans to buy government bonds as part of its latest effort to stem the damage from the continent’s debt crisis, which is also serving as a drag on the U.S. economy.
Following the announcement, the Dow Jones Industrial Average shot up more than 240 points to close on Thursday at its highest point since late 2007.
Next week, the Fed’s policy setting committee gathers for a highly anticipated meeting to decide what steps the U.S. central bank may take to boost the economy. This meeting of the Federal Open Market Committee (FOMC) on Sept. 12 and 13 is one of only two left before the November elections.
The question is whether the Fed will embark on another round of quantitative easing – when the government buys Treasury bonds or federally-backed mortgage assets – or take other steps intended to boost investing and spending.
While many believe the new jobs numbers will spur the Fed to act, Zandi sounded a note of caution in an interview with POLITICO.
The looming fiscal cliff – Washington-speak for a combination of expiring tax cuts and broad across-the-board spending cuts set to take hold in January – could force the U.S. central bank to wait until December when the economy is faced with those more dire economic challenges, he said.
Ginger Gibson, Seung Min Kim, MJ Lee, Ben White, Tim Mak, Kevin Robillard and Gregg Birnbaum contributed to this story