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October 26, 2014

Jobs Snapshot Downer Trips Up Obama’s Budget Game

If the new jobs numbers had come out the Friday before the election instead of today, President Barack Obama might well have lost.

Each month’s initial reports from the Labor Department are often significantly updated later on — sometimes for the better, sometimes for the worse. And they provide only a pair of snapshots of limited long-term value in assessing where the economy is headed and in guiding the president and Congress where to turn their attention next.

But the separate reports about job creation and the unemployment rate are guaranteed to make headlines, and those headlines shape public perception, and those perceptions shape campaigns and ultimately elections. And so, as a political matter, there was nothing at all to like about the government’s March assessment — except the fact that they came out 17 months before the congressional midterm and, for Obama, comfortably after he secured his second term.

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The net number of new nonfarm payroll jobs created was 88,000. But 12,000 positions were cut from the Postal Service — a decline in the public-sector workforce that’s been steady for months — and that helped offset the 95,000 in new private sector jobs. But that number was the smallest since last June, just 35 percent of the number of new jobs in February and less than half the consensus forecast of the economists who are expected to predict these things.

That will lead to a lot of wondering about whether something those economists had never been asked to consider in their calculations before — the deep cuts to domestic and military programs that started just as the month began — was the main reason for such a significant disconnect between expectations and reality. And the situation will only get more pronounced in the months ahead as the ripple effect from the sequester leads to more cutbacks at the businesses that rely on government contracts that are going to have to be curtailed.

“This is a punch to the gut,” Austan Goolsbee, former chairman of Obama’s Council of Economic Advisers, said on CNBC. “This is not a good number. And I think now you’re going to interestingly start seeing a lot of discussion about maybe the sequester’s a bigger deal than people thought it was.”

Beyond that, the separate unemployment rate report offered cold comfort. What looked like an improvement — a decline of one-tenth of a point to 7.6 percent, a four-year low — was in fact a big-time sign of worry for the long haul. The main reason the rate fell is that another half-million people gave up looking for work, so the pool of people counted as “jobless” got smaller. In fact, the percentage of Americans working or looking for work fell to 63.3 percent, the smallest share of the population since 1979.

While retiring baby boomers surely account for part of that drop, the main reason is that tens of thousands of people got so discouraged about their prospects for finding a place in the economy that they’ve stopped searching.

That measure of skepticism, as much as anything, will help shape how both Obama and congressional Republicans refine their statements of purpose for the budget deliberations that will get restarted in the new week.

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