Obama’s job creation hopes look fragile

May 4, 2012

By Martin Hutchinson
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Barack Obama can at last say he has presided over increased employment in America’s private sector, if not in government, since he arrived in the White House in January 2009. But the slowing pace of job creation evident from Friday’s monthly report and declining labor force participation could make for a tough sell in November’s elections.

To be fair, the jobs picture for April is better than the headline 115,000 increase suggests. Another 53,000 jobs were added through revisions to numbers for February and March, and a tick downward in the unemployment rate to 8.1 percent also helped the narrative. And with government shedding 15,000 positions last month, private sector gains were larger than the top-line figure. They were sufficient, in fact, to put jobs in private businesses 35,000 into the black since his inauguration – a landmark of sorts.

There are, however, still 607,000 fewer federal, state and local government workers than in January 2009. At last month’s pace, Obama may be able to claim by November that employment has recovered to a higher overall level than when he took office. The story, though, is undermined by a pace of job addition so slow that an updated Breakingviews calculator indicates it would take until almost 2030 to achieve full employment in the United States.

Meanwhile, with jobs hard to come by, participation in the labor force declined further to the lowest level since September 1981. The only age group becoming more likely to work in recent years is the 65s-and-over. Politicians should worry about the decline in participation by young and traditionally working-age people. It foreshadows long-term disengagement and potential social problems.

That backdrop may well dog the next president whether it’s Obama or Mitt Romney, the Republican challenger. Which man makes it to the White House will depend partly on economic and employment trends in the next six months, both real and perceived. Obama will be hoping the soft patch for jobs gives way to a brighter picture in short order.

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It appears that between the Eurozone’s problem and America’s problems, QE3 becomes increasingly likely. It is now primarily a matter of timing… preemptive or in response to a crisis?

I think it would be best to wait for a crisis to strike on at least on side of Atlantic, preferably on both sides. If QE3 is delivered preemptively, what can the financial wizards do if the QE fails to prevent a looming crisis… QE4?

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