Politics as Usual Won’t Return U.S. to Full Employment
The latest U.S. jobs report should send a message to both presidential candidates: The economy is growing too slowly to get millions of unemployed back to work, and the government can and should do something about it.
The Labor Department reported today that nonfarm payrolls increased by a seasonally adjusted 96,000 in August, far less than what the economy needs. Even with monthly jobs growth of 200,000, it would take nearly 10 years to get back to full employment. The one seemingly positive number in the report, a decline in the unemployment rate to 8.1 percent from 8.3 percent, was the result of a shrinking labor force, not vigorous growth in employment. If not for jobless workers giving up the search for work, the unemployment rate would have gone up.
Knowledge of the poor jobs report might have tempered President Barack Obama’s enthusiasm last night at the Democratic National Convention. His speech was disappointing, but it’s not the tone of one speech that matters. The real disappointment is that neither Obama nor Mitt Romney, his Republican challenger, has had anything substantive to say in this campaign about bringing unemployment down faster.
The Obama administration has a plan, the American Jobs Act, which we think has mostly good ideas for further short-term stimulus, but the Democrats aren’t actually pitching it. Romney’s proposals -- concentrating on lower taxes, smaller government and lighter regulation -- are directed to the longer-term vitality of the economy, not to the need to support the recovery right now.
What could they say, or actually do? First, they should agree that the approaching “fiscal cliff” must be dealt with immediately. This brutal and unwarranted tightening of fiscal policy, scheduled to start at the beginning of next year, was written into law when efforts to reach a deal on spending cuts and tax increases failed. It was intended to force a compromise, not to become policy. The presidential candidates have the country’s attention now. They can use it to demand that Congress act.
Second, they -- and particularly Romney -- can ease the way for the Federal Reserve to provide more monetary stimulus to the economy. The jobs report underscores the need for a new phase of quantitative easing, in which the Fed buys bonds to lower long-term interest rates. Romney’s party, though, has drawn the Fed into election-year politics by calling for stricter audits of the central bank, and Romney has let speculation mount that he wouldn’t reappoint Chairman Ben S. Bernanke (a Republican, by the way) when his second term expires. This tacit pressure on the bank to stand pat as the recovery stutters is wrong and should cease.
Longer-term remedies for slow growth and the stagnant labor market inevitably divide the parties and are properly the subject of the election fight. What’s odd is how little of substance either campaign has had to say on the subject, beyond the usual ideological cliches.
Serious discussion of unemployment has been off-limits for months. It’s as though the presidential candidates want to talk about everything except the main and most pressing issue. We hope the jobs report might change that by finally demanding their attention, though we won’t be holding our breath.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at email@example.com.