White House Faces Political Headaches Over Jobs Ahead of Labor Day

Sept. 4, 2010 — -- The skies over the White House were overcast Friday as President Obama and several prominent members of his economic team entered the Rose Garden to deliver remarks on the Labor Department's newly released August jobs numbers.

The skies -- a dreary reminder of Hurricane Earl's presence along the Eastern Seaboard -- went unacknowledged, much like the other glaring presence casting its shadow on the president's remarks: the jobs numbers themselves.

August saw a net job loss. And despite the fact that the private sector appears to be gaining a bit of steam with 67,000 jobs added in August, the public sector still is struggling. As a result, the unemployment rate, which has hovered over the 9 percent mark for 16 consecutive months now, rose again from 9.5 percent in July to 9.6 percent in August.

The simple truth is that more than half a million new job hunters emerged in August and the number of jobs being created is simply not capable of meeting that kind of demand.

"Our system just wasn't set up to deal with long-term unemployment," said Diane Swonk, chief economist at Mesirow Financial. "We were used to, during much of the post-World War II period, people losing jobs and then getting jobs again. Even if they had to accept lower pay in a new job, they could get a job fairly close to what they had been previously doing. That just isn't the case anymore. What we're seeing now is people, when they do accept work; they're accepting part-time work instead of full-time work in record numbers just to be employed."

Part-time workers certainly are a big element of the August jobs numbers story because of the layoffs of 114,000 temporary census workers. And part-time workers seem to have been skewing the jobs numbers since the spring, when the net increase of 431,000 jobs that the White House boasted of in May was propped up by the hiring of 411,000 temporary Census workers.

In May, President Obama acknowledged, "Most of the jobs this month that we're seeing in the statistics represent workers who've been hired to complete the 2010 census," but he never said just how many.

He appeared to be sidestepping the less-favorable elements of August's government data, as well. In the Rose Garden Friday, he made no mention of August's net job loss at all, choosing to focus instead on the private sector.

"This morning, new figures show the economy produced 67,000 private sector jobs in August, the eighth consecutive month of private job growth. Additionally, the numbers for July were revised upward to 107,000," Obama said. "Now that's positive news, and it reflects the steps we've already taken to break the back of this recession. But it's not nearly good enough."

Financial experts agree.

"We didn't lose as many jobs as we thought in June and July," Swonk said, "and we are creating some jobs in the private sector. That's good news. The question is, is it enough? And no, it's not.

"We've lowered the bar on what we expect from the economy so low that it's not hard to exceed that hurdle," she said. "The hurdle is now the ground."

Obama's 'Broader Package of Ideas' on Jobs

The so-called "Recovery Summer" has come and passed without any such recovery, and the Obama administration recognizes that much more action must be taken to restore the 8.4 million jobs shed since the downturn. Just what sort of action? The president told reporters that he will be "addressing a broader package of ideas next week."

One of the ideas in this broader package is likely a payroll tax holiday. This spending initiative is simply a newer version of a tax break signed into law in March as part of the hiring incentives to Restore Employment Act. It currently offers businesses tax credits to hire workers who have been unemployed for eight weeks or longer. The new version would extend the time period businesses have to use the credits and provide a break on payroll taxes that would be shared by employers and their workers -- temporarily, at least.

The president also undoubtedly will call on Congress to pass a bill giving "tax and loan breaks to small business," as he described it in his remarks in the Rose Garden Friday, and to extend a tax credit for businesses that spend money on "research and development."

There's also a big question: Will the president continue to press for the expiration of the "Bush tax cuts" for individuals making more than $250,000 a year?

Republicans feel these tax cuts should not be allowed to expire because such wealthy individuals fuel consumption spending, hiring and investment.

Democrats currently are divided on the issue. On one side of the issue, President Obama argues that in such an unstable economic environment the wealthy are unlikely to spend the extra funds. On the other side of the issue, some Democrats are pushing for the cuts to be extended at least one more year in the hope that they can spur some growth and help the economy mend.

"At the end of the day, we've got an election in November," Swonk said. "When there's an election in November, you can bet nobody's going to be raising taxes and everybody's going to be doing all they can to lower taxes. In such a fragile economic situation, nobody wants to go to the polls looking like they've raised taxes or defending an increase in taxes at this stage of the game."