It’s bad, man. The May unemployment report released Friday morning didn’t just announce one month of lethargic job growth — 69,000 added, fewer than necessary to even keep up with population growth. The government’s regular estimates can be off by enough to turn whispers of doom to shouts of joy. These things are fickle. But that’s just the problem: embedded in May’s miserable data were big downward revisions for March and April, and it seems the momentum the U.S. economy appeared to have after a sunny February report was little more than a mirage. GDP was slower than we thought too: a 1.9% annual rate rather than the 2.2% clip reported last month. Toss in a cautious central bank, a gummed-up Congress, bedlam in Europe and China’s running out of juice, and you get a dizzying confluence. Bad times. And Washington, more than ever, is feeling the effects.
With millions out of work, maybe it’s crass to say President Obama is suffering*. But he is. The economy has not reached escape velocity from the recession the way he had planned. And the bad news comes at a key time for his re-election campaign. These are the months that will determine the mood of the country and how voters will feel about its direction in November. “Problems in the job market were long in the making and will not be solved overnight,” White House Council of Economic Advisers chief Alan Krueger said in a statement, which was heavy on historical reminders of the recession’s origins and light on silver linings. It was the most optimistic analysis he could muster, and if the White House, which is eyeing Europe with increasing concern, wasn’t already in a panic, it surely is now.
Republicans, Mitt Romney chief among them, are getting in their licks. “The President’s re-election slogan may be ‘Forward,’ but it seems like we’ve been moving backward,” Romney said in a statement. “President Obama’s failed policies have made high unemployment and a weak economy the sad new normal for families and small businesses,” said House Speaker John Boehner. But there’s pressure on the GOP, especially Boehner, as well. A year ago, as House Republicans and the White House began their standoff over raising the federal borrowing limit, consumer confidence dropped and job growth decelerated. They avoided outright disaster in the final hour, but real damage was done. As Congress heads toward another debt-ceiling debate — and, more urgently, the task of disarming a massive group of scheduled spending cuts and expiring tax breaks by year’s end — Boehner needs to move his conference to action fast, or else he’ll have economic blood on his hands. In his statement, Boehner promised progress “in the weeks ahead.”
But weeks can quickly become months in the torpid Congress, and imminent action is more likely in the monetary wing of Washington’s policymaking apparatus. The Federal Reserve’s been in a cautious holding pattern since announcing a policy last September to lower interest rates on 10-year Treasury bonds. (That program, known as Operation Twist, is set to end next month.) With two Obama appointees recently having been added to the Fed’s board of governors and with the job market backsliding, dovish voices will likely grow louder at the Fed policy meeting June 19–20. Eric Rosengren, the president of the Boston Federal Reserve, has called for Operation Twist to be extended. And with Congress’s fiscal abilities jammed up, Fed chair Ben Bernanke may hear cries for another round of bond buying known as quantitative easing, a proposition most conservatives adamantly oppose. The decision, and the pressure, is his.
Summer in Washington is a hot, sticky, oppressive season. But Friday’s job report just might be the biggest reason to sweat there.