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Weak growth keeps jobless rate above 8%

By Paul Wiseman and Christopher S. Rugaber

Associated Press


WASHINGTON » The American job machine has jammed. Again.

The economy added only 80,000 jobs in June, the government said Friday, erasing any doubt that the United States is in a summer slump for the third year in a row.

"Let's just agree: This number stinks," said Dan Greenhaus, chief global strategist at the investment firm BTIG.

It was the third consecutive month of weak job growth. From April through June the economy produced an average of just 75,000 jobs a month, the weakest three months since August through October 2010.

The unemployment rate stayed at 8.2 percent — a recession-level figure, even though the Great Recession has technically been over for three years.

The numbers could hurt President Barack Obama's odds for re-election. Mitt Romney, the presumed Republican nominee, said they showed that Obama, in 3 1/2 years on the job, had not "gotten America working again."

"And the president is going to have to stand up and take responsibility for it," Romney said in Wolfeboro, N.H. "This kick in the gut has got to end."

Obama, on a two-day bus tour through the contested states of Ohio and Pennsylvania, focused on private companies, which added 84,000 jobs in June, and took a longer view of the economic recovery.

"Businesses have created 4.4 million new jobs over the past 28 months, including 500,000 new manufacturing jobs," the president said. "That's a step in the right direction."

The Labor Department's report on job creation and unemployment is the most closely watched monthly indicator of the U.S. economy. There are four reports remaining before Election Day, including one on Nov. 2, four days before Americans vote.

No president since World War II has faced re-election with unemployment over 8 percent. It was 7.8 percent when Gerald Ford lost to Jimmy Carter in 1976. Ronald Reagan faced 7.2 percent unemployment in 1984 and trounced Walter Mondale.

Patrick Sims, director of research at the consulting firm Hamilton Place Strategies, said that "time has run out" for unemployment to fall below 8 percent by Election Day.

That would require an average of about 220,000 jobs a month from July through October — more like the economy's performance from January through March, when it averaged 226,000 per month.

Few economic analysts expect anything close to that.

"The labor market is treading water," said Heidi Shierholz, an economist at the Economic Policy Institute. She called it an "ongoing, severe crisis for the American workforce."

The Labor Department report put investors in a sour mood.

The Dow Jones industrial average dropped 124 points. Industrial and materials companies, which depend on economic growth, were among the stocks that fell the most. The price of oil fell $2.77 per barrel to $84.45.

Money flowed instead into U.S. Treasurys, which investors perceive as safer than stocks when the economy is weakening. The yield on the benchmark 10-year U.S. Treasury note fell to 1.54 percent, from 1.59 percent on Thursday.

Investors were already worried about a debt crisis that has gripped Europe for almost three years and recent signals that the powerhouse economy of China is slowing.

Earlier this week the European Central Bank and the central bank of China cut interest rates in hopes of encouraging people and businesses to borrow and spend money.

For American investors, however, the jobs report fell into an uncomfortable middle ground.

Federal Reserve Chairman Ben Bernanke promised last month that the Federal Reserve would take additional steps to help the economy "if we're not seeing a sustained improvement in the labor market."

But some financial analysts said that the Labor Department report, while disappointing, was not weak enough to lock in further action by the Fed at its next meeting July 31 and Aug. 1.

The slowdown in job growth has been stark. From December through February the economy produced an average of 252,000 jobs a month, twice what is needed to keep up with population growth.

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DiverDave wrote:
This comment has been deleted.
on July 7,2012 | 06:48AM
soundofreason wrote:
HAWAII still doesnt get it either - hence rail. How many times have we heard rail is about jobs. Everyone goes home AND we get to subsidize the annual black whole.
on July 7,2012 | 08:29AM
wiliki wrote:
The stimulus did work. We could be in a huge depression now with 25% unemployment like the Great Depression if it were not for the Obama stimulus. Unfortunately, it was not enough and Republicans have forced cutbacks in govt spending that have made recovery harder... Here's a link.... http://krugman.blogs.nytimes.com/2012/04/25/american-austerity/

Note the census spike, but over-all trend in fed employment is down. Even in Bush's term employment (spending increased even greater than Clinton's term during the Clinton recovery) there was significant spending increase as the deficit mushroomed (due to tax cuts) because Republicans said at that time "deficits don't matter".

on July 7,2012 | 11:37AM
Anonymous wrote:
This comment has been deleted.
on July 7,2012 | 01:56PM
wiliki wrote:
He has a plan.... Republicans stand in the way for political reasons of a real stimulus that will bring our economy out of this depression.... http://books.wwnorton.com/books/detail-inside.aspx?ID=24617&CTYPE=G
on July 7,2012 | 07:58PM
matsuyama wrote:
Krugman is a quack.
on July 7,2012 | 06:22PM
wiliki wrote:
He and the leading economists such as Christine Romer and Larry Summers tried to get a higher stimulus passed, but Republicans opposed it. No quack here. Pretty much a consensus that we should have had a bigger stimulus.
on July 7,2012 | 08:11PM
what wrote:
Ha! Leading economists? No, they are popular with Obama because their ridiculous ideas allow him to freely spend and spend and spend us all into oblivion. I challenge you to come up with an example of any economy that has ever spent this much of its GDP in debt and became prosperous. Go ahead, try. If you look, all you will find is anemic, failed, or poor economies.
on July 7,2012 | 08:49PM
Kuniarr wrote:
Wiliki, your blog is based merely on your bias and speculation - "if it were not". As for your quoting Krugman, he is a bogus "economist" making up a situation and then basing his argument on the situation he concocted
on July 7,2012 | 07:01PM
wiliki wrote:
No... based on facts. Krugman has a book out now called "End this Depression NOW". A good read.....
on July 7,2012 | 08:12PM
what wrote:
You should read how Iceland did the opposite of Krugman, Europe, USA, and Japan, and are well on their way to a vibrant healthy economy. Japan is the poster child for Krugman. 20 years of Krugman like policies, and their economy is still in the sh*tter and about to collapse even further.
on July 7,2012 | 08:52PM
soundofreason wrote:
So the stimulus must also be responsible for the lack of purple elephants since "something" prevented them from surfacing too.
on July 7,2012 | 08:54PM
HD36 wrote:
US Treasury Bonds are in a bubble, bigger than the internet bubble and the housing bubble combined. When this one pops, all hell's gonna break loose.
on July 7,2012 | 10:03AM
wiliki wrote:
Nope no bubble... Interest rates are lower than ever... Here's a link. http://krugman.blogs.nytimes.com/2011/06/10/the-decline-of-pimco-macro/
on July 7,2012 | 11:45AM
Anonymous wrote:
This comment has been deleted.
on July 7,2012 | 02:02PM
wiliki wrote:
Frank has no connection to the housing bubble. That was Bush and his Republican friends.

No bond bubble. Interest rates have not gone up. So it is a safe investment with almost zero interest for the feds.

on July 7,2012 | 07:45PM
what wrote:
Krugman?! He's the biggest quack economist out there. He has no idea how much of an anti-stimulus DEBT is! Sure, you can temporarily "shock" and stimulate an economy briefly with wild debt spending, but for every stimulus dollar spent, there will be an even bigger anti-stimulus effect when the bills have to be paid.
on July 7,2012 | 03:10PM
wiliki wrote:
Nope that a basic fallacy. We have not been spending enough. Republicans have been cutting funds and our economy is suffering from too much cuts, not too much spending.... http://krugman.blogs.nytimes.com/2012/04/25/american-austerity/
on July 7,2012 | 07:47PM
what wrote:
Krugman is simply wrong. This recession was brought on by a mountain of bank financed leveraged DEBT. Too much debt is suffocating our economy. It is ludicrous to propose, as Krugman does, that MORE OF THE SAME that caused the recession is going to get us out of it. You can't finance an economy by paying off the credit card with another credit card, as Krugman suggests. ECONOMIES CONTROLLED BY GOVERNMENT MONEY PRINTING NEVER ENDS WELL. All these reasons are why Krugman is flat out wrong, and I laugh when people quote him.
on July 7,2012 | 08:17PM
HD36 wrote:
Ever heard of operation twist? The federal reserve is selling on the short end and buying the long end in order to artificially keep rates low, punishing savers. Rates on not low because we have a strong economy and small government with a low GDP to debt ratio as they would be if that was the case.
on July 7,2012 | 07:25PM
wiliki wrote:
The Fed can't keep rates below zero. So it has no where to go.... Here is the answer in terms of a monetary solution to everyone trying to deleveage at the same time.... Inflation! http://krugman.blogs.nytimes.com/2012/06/25/deleveraging-and-the-depression-gang/
on July 7,2012 | 07:54PM
what wrote:
The true solution to our economic malaise is to go back to the tried and true practice of cancelling unpayable debts via bankruptcies, foreclosures, and defaults. We need to flush debt out of the economy. Unfortunately, people like Krugman and Obama and Bernanke have it backwards and to explode the problem into a full-blown depression by increasing the amount of debt strangling the economy. We need to absorb some pain NOW and flush the debt out of the system, before it turns into a depression.
on July 7,2012 | 08:25PM
HD36 wrote:
Rates are already below zero. The real rate of interest is the : ( nominal rate- inflation rate) not the manipulated numbers printed by the government. ( they don;t count food or energy). German bunds are below zero. Yes, this will be the biggest bubble ever., buy a bullet proof sheild, vest, helmet, shin gaurd, etc...
on July 7,2012 | 11:20PM
HD36 wrote:
You're right that the fed can't keep rate's at zero. Yes, they have no where to go but up! Thank you, no you understand.
on July 8,2012 | 12:30AM
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