Bloomberg News

Slowdown Magnifies Jobs Number for Obama Race With Romney

June 02, 2012

May’s Less-Than-Forecast Jobs Growth May Weaken Obama Campaign

Job seekers at the Wells Fargo call center in Salem, Ore., on May 30, 2012. Photographer: Thomas Patterson/Statesman-Journal/AP Photo

President Barack Obama’s re-election prospects suffered a blow yesterday as a government report showed hiring slowed last month, reinforcing Republican Mitt Romney’s main line of attack against the incumbent.

Jobs in the U.S. grew by 69,000 in May, the fewest in a year and less than the most pessimistic forecast in a Bloomberg News survey of private economists. The unemployment rate increased to 8.2 percent, the first rise since last June.

The jobs report “keeps the focus on the president’s performance and on the Obama record,” said Stu Rothenberg, editor of the nonpartisan Rothenberg Political Report in Washington. “It simply makes it harder for the president to say it’s not about me and it’s about a choice between two men. It’s much easier for Romney to say, ‘Now, wait a minute, is he doing a good job?’”

The slowdown in job growth follows April figures that also came in below forecast and were revised down further yesterday, to a 77,000 gain. The Labor Department’s monthly employment report comes on top of other signs of a weakening economy, the overriding concern of voters leading up to the November election.

Obama, speaking at a fundraiser in Minneapolis yesterday, suggested the slowdown in U.S. job growth was primarily due to European governments’ inadequate response to the continent’s debt crisis, saying “our biggest challenge is not here in the United States but the economy overseas.”

Europe’s Crisis

“Europe is having a significant crisis in part because they haven’t taken as many of the decisive steps as were needed to deal with the challenge and that’s weakening Asia and that means it’s harder for our exports,” Obama said.

Government reports yesterday showed manufacturing output shrank in Europe and slowed in China, the world’s second-largest economy.

Republicans immediately blamed Obama’s policies for the stalling labor market. Romney called the jobs numbers “very bad news for middle-class families in America” and a “harsh indictment” of Obama’s policies.

“This crisis has been going on for 40 months,” Romney said in an interview on CNBC. “The job of the president is to get America back to work.”

Romney said, if elected in November, he would “focus all my energy” on such an effort. “This president has not.” He said Obama “is always quick to find someone to blame” for the struggling economy.

Refusing to Cooperate

House Speaker John Boehner faulted Democrats and Obama for what he was their refusal to work with Republicans to pass legislation to promote job growth.

“If they had taken our advice and worked with us, the economy would be better,” the Ohio Republican told reporters.

While Obama and White House officials sought to put the numbers in the best light by citing continued expansion in hiring over the past 27 months, some allies were more direct.

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

Reports released earlier in the week showed the U.S. economy grew less than initially estimated during the year’s 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 Slide

U.S. stocks in May suffered their worst drop since September amid the slowdown in economic growth and signs the European debt crisis is worsening. The Standard & Poor’s 500 Index (SPX) 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. The S&P declined 2.5 percent to 1,277.79 yesterday, its biggest one-day retreat since November. The Dow Jones Industrial Average wiped out its gain for the year.

Still, there are signs of life in the economy. Consumer spending rose 0.3 percent in April, evidence that households are supporting growth. Home values in 20 cities declined at the slowest pace in more than a year during the 12 months that ended in March. Car sales during this year’s first four months have been running at their fastest pace since 2008.

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

Keeping Pace

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.

The jobs report underscored parallels with the climate of economic distress confronting the last two presidents to lose re-election, Republican George H.W. Bush in 1992 and Democrat Jimmy Carter in 1980. Both were defeated in the aftermath of recessions.

Still, the trajectory of the economy this time differs. In 1980, the unemployment rate rose 1.8 percentage points during the election year to peak at 7.8 percent in July. In 1992, the unemployment that followed the 1990-91 recession also didn’t reach its height until the election year, peaking at 7.8 percent in June.

Peak Unemployment

Joblessness peaked following the 2007-2009 recession at 10 percent in October 2009. Despite the 0.1 percentage point uptick in the May unemployment rate, joblessness has declined during the election year and is 0.8 percentage points lower than a year earlier.

Obama also hasn’t faced the discontent within his own party that fueled insurgent primary challenges by then-Senator Edward Kennedy of Massachusetts in 1980 and Patrick Buchanan in 1992, and third-party general election candidacies by John Anderson in 1980 and Ross Perot in 1992.

The political impact of economic discontent in 1992 also was compounded by public impressions that Bush was “out of touch,” magnified by incidents such as the president’s expression of surprise when encountering a price scanner at a grocery store and his glance at his watch during one of the presidential debates, said Democratic consultant Tad Devine.

Close Race

Obama and Romney, the former governor of Massachusetts, are locked in a close contest, exchanging the lead four times during May in Gallup’s daily tracking poll of voter preferences. Romney led with 46 percent support against 45 percent for Obama in the Gallup tracking poll conducted May 24-31. In yesterday’s results, Obama was ahead by 3 percentage points, 47 percent to 44 percent for Romney. 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 direction 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.”

To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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