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Tags: Slow | Jobs | Obama | Campaign

Less-Than-Forecast Jobs Growth May Weaken Obama Campaign

Friday, 01 June 2012 11:14 AM EDT

An increase in the unemployment rate in May and the lowest month of job growth in a year weakens President Barack Obama’s campaign to win re-election.

Payrolls expanded by 69,000 last month, less than the most pessimistic forecast in a Bloomberg News survey of private economists. The unemployment rate increase, to 8.2 percent, was the first for the jobless rate since last June.

Steven Rattner, who headed Obama’s automobile task force, said on Twitter that there is “absolutely nothing good to be said” about the employment report.

Editor's Note: Obama Donor Banned This Video But You Can Watch it Here

Republicans blamed Obama’s policies for the weak labor market. Mitt Romney, the party’s presidential candidate, called the jobs numbers “devastating news for American workers and American families.”

“It is now clear to everyone that President Obama’s policies have failed to achieve their goals and that the Obama economy is crushing America’s middle class,” Romney said in a statement.

The May jobless report follows April figures that also came in weaker than forecast and were revised down further today, to a 77,000 gain. Reports released Thursday showed the economy grew less than initially estimated during the first quarter and business activity in May expanded at the slowest pace in more than two years. The number of Americans applying for unemployment benefits rose to a one-month high in the week ended May 26.

Stocks Decline

U.S. stocks in May suffered their worst monthly drop since September amid the slowdown in economic growth and signs the European debt crisis is worsening. The Standard & Poor’s 500 Index declined 6.3 percent during the month.

Yields on the 10-year U.S. Treasury note tumbled to record lows for a third day after the Labor Department report. S&P 500 futures expiring this month extended losses and were down 2 percent to 1,282.90 at 8:50 a.m. in New York.

Private forecasters had expected the U.S. unemployment rate in May to remain steady at 8.1 percent and non-farm payrolls to grow by 150,000, according to the median estimates of 39 economists surveyed by Bloomberg. Payrolls had expanded by an average of 226,000 during the first three months of the year.

Adding Jobs

The economy needs to add approximately 100,000 jobs each month to keep even with population growth, said Heidi Shierholz, an economist with the Economic Policy Institute in Washington.

Any job growth below 150,000 “would add to a growing sense of worry” confronting Obama, said Stu Rothenberg, editor of the nonpartisan Rothenberg Political Report in Washington, interviewed before the release of the report.

The administration, seeking to blunt the political impact, highlighted total private sector job gains over the past 27 months while promoting measures Obama has proposed to boost hiring.

“Problems in the job market were long in the making and will not be solved overnight,” Alan Krueger, chairman of Obama’s Council of Economic Advisers, said in a post on the White House website. “There is much more work that remains to be done to repair the damage caused by the financial crisis and deep recession that began at the end of 2007.”

Close Race

Obama and Romney, the former governor of Massachusetts, are locked in a close contest, exchanging the lead three times during May in Gallup’s daily tracking poll of voter preferences. Obama led with 47 percent support against 44 percent for Romney, a former Massachusetts governor, in the Gallup tracking poll conducted May 23-30. The margin of error is plus or minus 2 percentage points.

The increase in the unemployment rate presents an additional challenge to Obama because it is the trajectory of the economy that is most influential in shaping voter decisions in the November election.

“Take the slope of the economy and that’s really a good indicator of what voters will do, how they evaluate presidents,” said Christopher Wlezien, a political science professor at Temple University in Philadelphia and co-author of the forthcoming book “The Timeline of Presidential Elections.”

Main Issue

The monthly employment report was the first released since Romney clinched the Republican presidential nomination on May 29 by winning the Texas primary. The former private-equity executive has made criticism of Obama’s management of the economy the centerpiece of his campaign.

“For all the talk about gay marriage and Donald Trump, the election is still about jobs and the economy,” Rothenberg said. “The unemployment rate and the jobs created each month are probably about the most important numbers we see in the campaign.”

Obama is traveling today to a Honeywell International Inc. training center in Golden Valley, Minnesota to highlight legislation he has proposed to assist veterans returning from Iraq and Afghanistan in finding jobs. Romney has no public events scheduled.

Consumer confidence has been rising the past two weeks, led by political independents, whose sentiment improved from minus 48.6 percent to minus 40.0 for the week ended May 27, according to the Bloomberg Consumer Comfort Index.

‘Severe Economic Discontent’

The reading among political independents is “still dismal,” said Gary Langer, president of Langer Research Associates in New York, which compiles the index for Bloomberg. Readings lower than minus 40 are associated with “severe economic discontent,” he said.

The comfort index was minus 18 in May 2004 and minus 11 in May 1996, years in which incumbent presidents were re-elected, according to the report. This year’s gauge is closer to the minus 43 recorded in late May 1992, the year George H.W. Bush lost his bid for a second term.

Even so, Langer said, “The key element ahead is not just the level of consumer sentiment, but its trajectory — an open question as the labor market struggles and global financial uncertainty darkens the horizon.”

Editor's Note: Obama Donor Banned This Video But You Can Watch it Here

© Copyright 2023 Bloomberg News. All rights reserved.

Friday, 01 June 2012 11:14 AM
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