Poor Jobs Numbers Add Urgency To Budget Talks

It turns out that was no bump in the road the economy hit this spring. It was more like a concrete jersey barrier.

Hiring came to a near standstill last month, with paltry gains in the private sector almost completely offset by layoffs in the government. A report from the Labor Department shows employers added just 18,000 jobs in June. That’s even worse than the dismal numbers from the month before. Meanwhile, the unemployment rate ratcheted up to 9.2 percent.

There wasn’t a scrap of good news in the Labor Department’s report for President Obama to seize on.

“Our economy as a whole just isn’t producing nearly enough jobs for everybody who’s looking,” he said on Friday.

The slowdown marks a turnaround. Earlier this year, employers were adding workers at a healthy clip of more than 200,000 each month. But since March, more than half a million people have joined the ranks of the unemployed. And the unemployment rate has jumped by four-tenths of a percent.

Temporary services, which are often an early warning sign, cut 12,000 jobs last month.

“Our best week was the very first week of March,” says Tom Maher owns a Manpower temporary firm in Dayton, Ohio. “And we saw steady growth all through that first quarter. When we got towards the last week of March and then starting into April is when we started to see a pretty big decline. And it happened pretty rapidly.”

Maher often supplies temporary workers to automakers and parts suppliers, many of whom are still recovering from the disruptions caused by the Japanese tsunami in mid-March. Last month, Maher says he had jobs for 15 percent fewer workers than at the same time last year.

“It’s not only the slowdown,” he says. “It seems like the optimism has been dissipating. People were very optimistic heading into the new year. And things have definitely been tempered.”

House Speaker John Boehner says the stagnant jobs picture adds urgency to the ongoing budget talks between lawmakers and the White House.

“We have three really big problems: We have a spending problem, we have a debt problem, and we have a jobs problem,” Boehner said. “That’s why I fundamentally believe it’s important to fix our spending and debt problem and get our economy moving again.”

But in trying to solve the deficit problem, lawmakers run the risk of worsening unemployment.

“This is not the right time to be cutting spending in the short term. Sharp spending cuts would have a negative impact on the job market,” says economist Heather Boushey, from the Center for American Progress, a think tank friendly to the Obama administration. She argues cutting the deficit should take a back seat until more people are back at work.

The federal government is no longer shoveling money into the economy as it was during the president’s first two years in office. And there’s no political appetite for another big stimulus program. Still, White House economic adviser Austan Goolsbee sees the disappointing jobs report as a “call to action” for policymakers.

“We want the private sector to be the primary engine of recovery,” he says. “But Washington can take actions to help the private sector stand up quicker.”

Goolsbee suggests an infrastructure bank, to employ idle construction workers building roads and bridges, as well as new trade agreements, to boost American exports.

President Obama also called for an extension of the payroll tax cut, which is otherwise due to expire at the end of this year.

“There are a lot of middle-class families who could sure use the security of knowing that the tax cut that I signed in December to help boost the economy and put a thousand dollars in the pockets of American families, that that’s still going to be around next year. That’s a change that we could make right now,” the president said on Friday.

Cutting payroll taxes is one flavor of economic stimulus that Republican lawmakers might go along with, even though in the short term it would make the deficit worse.

On Sunday, the president sits down with congressional leaders to continue work on a deficit-cutting plan. Many lawmakers see that plan as a prerequisite for raising the government’s debt ceiling. Goolsbee says ending uncertainty about whether Washington will pay its debts would be another positive step.

“We have got to stop bickering in Washington and do those things that we can agree on,” he says.

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