Promising Jobs Report Fuels Both Sides of the Budget Wars
For shaping politics, the rosy jobs reports out today are undeniably a kick start for President Barack Obama and a kick in the teeth for his Republican critics. As for shaping fiscal policy, the numbers look to fuel the currently ambivalent muddle.
The headline figures are that a net 165,000 jobs were created in April, well above the consensus forecast and enough to help push the unemployment rate down to 7.5 percent, its lowest level since December 2008. The short-term message countermands some much more ambivalent recent economic data, which had signaled a “spring swoon” for the third year in a row.
But reasons for optimism over the longer term are found just below the surface in the job creation report. The Labor Department now says it underestimated the number of payroll positions added in the previous two months by a combined 114,000. Most notably, instead of the 88,000 new jobs initially estimated for March — a far worse-than-expected number that gave rise to considerable anxiety — the number is actually 138,000 thanks to some additional data.
And those upward revisions mean that, during the previous half year, the economy created an average of 208,000 jobs a month. The conventional view is that a characteristics of an economy that’s healthy enough to shrink unemployment in a sustained way is monthly job creation above 200,000.
The reports will provide evidence for both sides in the arguments over how to shrink the deficit and whether the sequester should be fully turned off before a bigger budget deal is reached.
The Congressional Budget Office has estimated those deep and across-the-board cuts will trim the gross domestic product by 0.6 percent this year. Private economists have warned that leaving the sequester in place through the end of the year would hold down private sector job creation by hundreds of thousands, mainly because of its effect on government contracting,
Today’s report will be hailed by some fiscally conservative Republicans as evidence those warnings are overblown, and that the economy is proving itself strong enough to stabilize and start expanding despite the reductions in the size of the federal government they so emphatically espouse. They also point to numbers in the report showing many full-time positions being supplanted by temporary workers as a way for companies to avoid having to provide medical insurance under Obamacare.
In contrast, Democrats will argue that job creation and other economic indicators would be able to do even better if the indiscriminate spending cuts were replaced with a more proactive budget deal that includes trims to health-care entitlements and more tax revenue from the wealthy. They also note that the full effects of the sequester, which has only been in place two months, will not be felt on business hiring until summer.
“While more work remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression,” said the president’s top economic adviser, Alan Krueger. “Now is not the time for Washington to impose self-inflicted wounds on the economy.”
Governments at all levels shed an additional 9,000 jobs in April, while private sector firms added 176,000 positions. While 11.7 million people remained unemployed but are still looking for jobs in April, that number is 5.4 percent smaller than it was in January.
The financial markets took quick and enthusiastic note of the news, pushing the Dow Jones industrial average past 15,000 and the S&P 500 index above 1,600 for the first time by mid-morning.
But Republican congressional leaders, who for more than a year have had their “not nearly good enough” news releases queued up to send minutes after Labor releases its monthly numbers, stayed silent for more than an hour before issuing more tepid than usual statements.
The reports “showed some signs of hope for the thousands of people who found a job in April,”House Majority Leader Eric Cantor said, but “this growth is way behind our nation’s potential. We must focus on job creation more than one day a month.”