The Labor Department released its monthly Employment Situation Report this morning, announcing that the economy added 80,000 new jobs in June – slightly less than what economists were predicting, and far too small a number to put a dent in the unemployment rate or to be a harbinger of sustained and vigorous economic recovery.
Economists surveyed by Bloomberg news were expecting 90,000 new jobs added, after weak numbers in Europe and a pronounced slowdown in manufacturing activity further dampened prospects for the economy.
There were a few bright spots in June: a report from the private payroll processing company ADP predicted that the private sector would add 176,000 new jobs, while auto sales were strong and indications of a nascent housing recovery were present.
But it appears that the headwinds of uncertainty in Europe and Asia, paired with high unemployment and weak demand at home, are preventing employers from undertaking the kind of hiring that could induce an economic comeback. Even the high end of economists’ expectations – 167,000 new jobs — wouldn’t have represented a robust-enough number to indicate a swift or sustained recovery. According to the Congressional Budget Office, The U.S. economy must to add at least 90,000 jobs a month to keep up with population growth, although that number is an estimate and could range higher depending on how many workers decide to rejoin the labor force in a given month.
So what does this jobs report mean for the economy going forward? The U.S. economy can apparently do no better than tread water. The employment numbers of the past few months have been pretty dim, but not dim enough to spur action from Congress or the Federal Reserve. And with the 2012 Presidential election in full swing, political realities virtually guarantee that there will be no new fiscal policy initiatives out of Washington.
There is a chance that the Federal Reserve will announce a third round of quantitative easing — a so-called QE3 program of bond buying in an attempt to stimulate the economy — but Fed Chairman Ben Bernanke has been reluctant to launch such an initiative. And while June’s jobs numbers are bad, they may not be dismal enough to whet the his appetite now.
However, recent poor manufacturing data led some economists to speculate that QE3 could be announced as soon as the Fed’s next meeting, which runs from July 31 to Aug. 1. As Tom Porcelli at RBC Capital Markets told Reuters this week:
“With both the growth and inflation components slowing sharply, this puts the Fed firmly in play at the August 1 meeting.”
Of course the real losers in this situation aren’t the politicians, but the more than 5.4 million Americans among the long-term unemployed. According to the National Employment Law Center, recent changes to the federal unemployment benefits program and the expiration of some state programs will cause half a million of these workers to lose their benefits by the end of August. While politicians and bureaucrats in Washington and Brussels fight a trench war for the slightest political advantage, and while C-suite executives in New York and London focus on their next quarterly earnings report, workers’ skills steadily erode as they become more alienated from the labor market. That’s a problem that will only make the next few jobs reports bleaker, not better, and push any hope for real recovery further into the future.