Reactions to the Grim June Jobs Report: What Went Wrong

The general and sort of obvious consensus is that we're back-tracking

The June jobs report does not look good for anybody. With unemployment up 9.2 percent and only 18,000 jobs added--despite reports that up to 175,000 jobs had been created--Republican leaders have been quick to blame President Obama for not better handling the recovery. Obama is doing damage control by delivering a statement Friday morning and likely attempting not to let the jobs report blow the debt ceiling deal he's been working towards. Meanwhile, economists are scrambling to figure out what's gone wrong.

House Speaker John Boehner said, "Today's report is more evidence that the misguided 'stimulus' spending binge, excessive regulations, and an overwhelming national debt continue to hold back private-sector job creation in our country." He seems similarly pessimistic about the debt ceiling talks, ""It is not like there is some imminent deal about to happen … This problem has not narrowed at all in the last several days. There is no agreement in private or in public."

Michele Bachmann directed her disapproval more directly at Obama, her opponent in the 2012 presidential campaign. "It's stunningly bad news. It's bad news for the president politically, but it's even worse news for the American people," she said of the June jobs report. "Clearly the president's policies haven't worked. It's a failure. The stimulus has only brought us deeper in debt with nothing to show for it."

Austan Goolsbee, the chairman of Obama's Council of Economic Advisors, conceded that the numbers were bad and mapped out some preliminary next steps on the White House blog:

The unemployment rate remains unacceptably high and faster growth is needed to replace the jobs lost in the downturn. Today’s report underscores the need for bipartisan action to help the private sector and the economy grow--such as measures to extend the payroll tax cut, pass the pending free trade agreements, and create an infrastructure bank to help put Americans back to work.  It also underscores the need for a balanced approach to deficit reduction that instills confidence and allows us to live within our means without shortchanging future growth.

Paul Krugman reacted quickly on his New York Times blog, explaining:

My bottom line on the inflation-deflation issue has always been to look at wages; you can’t have a wage-price spiral if wages ain’t spiraling. And they aren’t, to say the least.

It’s important to realize, by the way, that stagnant wages are NOT good for recovery; all they do is ensure that the burden of debt relative to income remains high, keeping demand and employment down.

The situation cries out for aggressively expansionary monetary and fiscal policy. Instead, however, all the political push is in the opposite direction.

Ezra Klein warned on Twitter, "The job numbers should change the debt ceiling debate. Economy needs more support now, austerity should wait. They won't." Klein expanded on those thoughts at his Washington Post blog:

We’re not recovering. We’re backsliding.

And Washington is making it worse. The Federal Reserve has ended its underpowered QE2 program and has no plans to replace it with QE3. Congress has is ending a variety of stimulus programs and shows every intention of either moving immediately to austerity, or nearly defaulting on the national debt and then, after causing economic chaos, moving immediately to some form of austerity. So the two institutions capable of helping the economy lift itself up are, instead, pressuring it to stay down.

We could do more. We should do more. But Congress won’t do anything more. The labor market, initially rocked by a financial crisis, is now stagnating because of a political one.

Steve Schaefer at Forbes offers a sneak preview of the market reaction:

The stunning lack of improvement in June’s report – April’s payrolls figure was revised to 217,000 from 232,000 and May’s cut by more than half to 25,000 from 54,000 – rocked Wall Street Friday morning, as index futures sharply reversed after indicating small opening gains earlier. The Dow Jones industrial average, S&P 500 and Nasdaq were all signaling a red start to the trading session after solid gains Thursday.