Analyst Confident in Growth Despite Slowdown in Jobs Report

WASHINGTON—A disappointing U.S. jobs report sent the stock market into a dive Friday, but while the figures indicate a slowing economy, some analysts say predictions of gloom are an overreaction and may impact confidence levels at a critical time.

Stock prices plunged following a report from the U.S. Bureau of Labor Statistics (BLS) indicating that the U.S. economy created 80,000 jobs in June, which was slower than expected and well below the number needed to bring down the 8.2 percent unemployment rate.

The June data saw payrolls up an average of 75,000 per month over the second quarter, well below the average of 226,000 in the prior three months, stated Jared Bernstein, a former economic adviser to the White House, in his blog.

Bernstein notes that the slowdown is settling into a general trend and is across many industries, including manufacturing which added just 11,000 in June, compared to 41,000 across the first quarter.

Whether it is the wrangling in Congress or the European financial crisis, a lack of confidence and uncertainty in the market has a crippling effect.

“That is really not where we need to be right now,” he stated.

Bernstein stated, however, that the figures should not be overly dramatized by partisan politics, noting that in a volatile global economy even small gains are welcome.

“We’re adding jobs, as has consistently been the case, month after month, for a few years now,” he stated. “It’s just that we’re adding them too slowly.”

Bernstein pointed to positives in the report, noting improvements in some states over others, and increases in wages, with weekly earnings up 2.2 percent over last year’s level.

While public sector employment declined, largely due to cuts in education, other areas of local government made gains, he noted.

Campaigning in Poland, Ohio, Barack Obama acknowledged that there was more work to do on the economy, but downplayed the monthly data. He pointed to long-term gains that added over 4 million jobs in the past 28 months, following what he called “the worst economic crisis of our lifetime.”

“That’s a step in the right direction,” he said.

Republicans were quick to highlight the jobs report, accusing the Obama administration of failed policies and of mishandling the economy.

“Another month of sluggish job growth offers more proof that the president’s tax-and-spend policies are destroying opportunities for workers and undermining employers’ ability to hire and invest in their businesses,” said John Kline (R-Minn.), chairman of the House Committee on Education and the Workforce.

GOP presidential candidate Mitt Romney described the report as a “kick in the gut,” in a statement.

He blamed Obama for continued high unemployment and proposed a plan of action to create jobs. The plan includes creating “energy jobs” and cheaper energy; bringing tax rates down; cutting exemptions, deductions, and loop holes; opening up new markets in Latin America; and “cracking down on China when they cheat” so they don’t “steal our jobs unfairly.”

European Crisis

Lawrence Creatura from New York-based fund managers Federated Investors Inc., said the BLS report is a critical indicator of economic strength, but that the financial crisis in Europe was also taking its toll.

“Europe has become a multiyear yo-yo of increasing expectations and subsequent disappointment,” he told Bloomberg Business.

Analysts now see uncertainty, both domestically and internationally, as critical to business confidence going forward.

Brookings Institution economist Gary Burtless said the BLS report indicates that layoffs have not increased, but that businesses are increasingly hesitant to hire.

“Current job market weakness is mainly explained by feeble employer demand for additional workers,” he writes on the Brookings website. Burtless was a former Labor Department and Department of Health, Education, and Welfare economist under the Carter administration.

Whether it is the wrangling in Congress or the European financial crisis, a lack of confidence and uncertainty in the market has a crippling effect.

“When we get an increase in general uncertainty, employers tend to postpone investment and hiring decisions,” Michael Gapen, senior U.S. economist with Barclays, told CNN.

While the health or weakness of the U.S. economy is sure to be the focus of the general election, recent polling suggests the electorate is showing more tolerance toward Obama’s efforts to boost the economy.

According to a Real Clear Politics average of polls taken from late June until July, Obama is keeping ahead of Romney, 47 to 44.3 points. The most recent of the bunch, the Rasmussen Tracking poll released July 7, shows the two in a dead heat.

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