What Jobs Report Means for Voters, Congress, and Federal Reserve

The government needs to take bold action to create jobs and put people back to work.

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Eileen Appelbaum is a senior economist at the Center for Economic and Policy Research.

Private sector companies added 103,000 jobs in August, continuing the steady, if unimpressive, increase in employment that began in October 2010. The unemployment rate, which is down from its peak of 10 percent, has remained stuck above 8 percent for eight months.The jobs report confirmed continuing weakness in the economy, which grew just 1.7 percent at an annual rate in the second quarter.

The weak jobs report is not likely to have much of an effect on the presidential campaign. U.S. voters were already well aware that the slow improvement in the labor market offers little help to the 12.5 million unemployed workers or the 8 million who are working short hours and need full-time jobs. It is likely, however, to push the Federal Reserve to take new action at its policy meeting next week to prevent the economy from slipping back into recession. The Fed has indicated it is well aware of that the recovery has been too weak to bring down unemployment or put the economy on a robust growth path. This jobs report should lead the Fed to embark on a new wave of 'quantitative easing'—buying long-term bonds, perhaps including mortgage-backed securities—to raise demand and reduce long-term interest rates to promote borrowing and spending by households and businesses.

[Read the U.S. News Debate: Should There Be More Quantitative Easing?]

The latest jobs numbers confirm that state and local payrolls continue to shrink. Since the recovery began in June 2009, state and local governments have shed 630,000 jobs, about half of them in K-12 education. The failure of Congress to honor President Barack Obama's 2010 request for block grants to the states to preserve public education and services vital to the long-run growth and competitiveness of the U.S. economy was short sighted. It was also unusual since Congress has always made funds available to the states to maintain vital services when unemployment exceeds 7 percent. The president's proposals for investments in infrastructure—to rebuild crumbling roads, bridges, and water works—were similarly defeated by Congress despite the fact that they are desperately needed and would have spurred private sector job creation.

Job quality also continues to take a beating in the recovery. Low quality jobs have been on the increase in the United States since 1979. Job creation in the recovery is exacerbating this long-run trend. A recent report found that while 60 percent of job losses during the recession were in mid-wage jobs in industries such as construction and manufacturing, these jobs account for only about 22 percent of the jobs added in the recovery. Low-wage jobs in industries like retail and food services accounted for about 20 percent of job losses during the contraction, but have provided the bulk of the jobs since the recovery began—about 58 percent of the increase. Healthcare has been the one bright spot, adding jobs across the wage spectrum through the recession and recovery. But job growth in this sector is slowing. It averaged just 15,000 jobs a month over the last three months, a little more than half the monthly average for 2011.

[See a collection of political cartoons on the economy.]

While the latest numbers on the economy may not have much of an effect on the presidential election, the election is vital to the future of the economy. The most important task facing whoever wins that election remains, as it was in 2008, is implementing policies that create jobs and promote more rapid economic growth. Tax cuts for the wealthy or reliance on Bowles-Simpson type proposals for reducing the deficit will not increase economic growth, enhance the competitiveness of the economy, or improve the outlook for struggling middle and low wage workers. Monetary policy to stimulate the economy is to be welcomed, but monetary policy cannot by itself promote a robust recovery. For that, there is no substitute for bold programs from the president and Congress that will increase growth and put the country back to work.

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