It wasn’t what the Obama Administration wanted to hear. The new employment figures out this morning show that the U.S. economy created a mere 96,000 jobs in August, far fewer than the 130,000 that most economists were expecting. In addition, the already low gains of the past two months were revised downward.
Key sectors like manufacturing shrank sharply, owing to a paring of auto jobs. It matters little that this was largely caused by trouble in Europe and a slowdown in emerging markets that has depressed sales. The unemployment rate actually went down, from 8.3% to 8.1%, but only because the labor force contracted. The U.S. labor-force participation rate is at a 12-month low of 58.3% — lower than in many parts of Europe, in fact — and wages are still flat. In short, the President will have to fend off new attacks on his economic record from the Romney camp.
So far, Obama has been a Teflon President when it comes to the economy. As I wrote in my Curious Capitalist column in TIME last week, one of the most interesting aspects of this election season has been how little of a dampening effect high unemployment and low consumer confidence have had so far on the President’s re-election prospects. Since the Conference Board’s consumer-confidence measure was introduced in 1967, no incumbent has ever won re-election without confidence averaging above 95. (It’s now around 60, much lower than when Carter lost in 1980.) Yet Obama continues to run neck and neck with Romney in most polls. What has helped the President is that voters have become savvier about the global economy: they know that a lot of the economic trouble at home emanates from abroad and that the key issue is the shrinking middle — a problem that Romney, with his Cayman accounts and tax-deductible horse, seems ill suited to fix.
That said, the next couple of months of data are going to be crucial. The new employment numbers virtually ensure that the Fed will start a third round of quantitative easing, QE3, to try to stoke the economy. I don’t think it will do much. Only the first round of QE had much of an effect, and to the extent that anything is bolstered, it will likely be the stock markets, which benefit mainly the rich. Even that effect will be dampened, since the markets have basically priced in a third round of Fed ammo anyway.
The truth is that central bankers can’t save us. They’ve stoked the economy for decades, and they are now left shooting blanks. We have to save ourselves, and the only way to do that is by slowly and surely rebuilding the U.S. job-creation engine. Not with tax cuts — can we please face facts and admit taxes are going to have to go up to make the budgetary math work? — but with smart investments in the things that are going to make companies want to set up shop and keep jobs in America. That means education, infrastructure, high-growth industries like technology and clean energy and the like. It may sound boring, but it’s true.
Those are, of course, all the things the President talked about last night in his DNC speech, in which he laid out a “hard road ahead, but one that leads to a better place.” Whether he gets to take the nation on that journey may well depend on the next couple of labor reports.