By Peter Baker
Washington Post Staff Writer
Saturday, March 8, 2008
A surprisingly bleak employment report sent tremors through Washington and roiled the presidential campaign yesterday, infusing new urgency into the debate over how to reverse an accelerating economic slide and fueling a political contest over who to blame for it.
The nation shed 63,000 jobs in February, the worst job loss in five years, the Labor Department reported, and another sign that the economy may have slipped into a recession that could prove to be the defining challenge for President Bush and Congress through the rest of his administration.
Responding quickly to the report, Bush asked for patience to let an economic stimulus package he signed last month start to work. Democrats on the campaign trail just as quickly faulted the president's economic policies, and congressional leaders pressed for a new economic package to pump money into unemployment benefits, as well as road construction and other job-creating infrastructure projects.
"Losing a job is painful, and I know Americans are concerned about our economy," Bush told reporters at the White House. "So am I. It's clear our economy has slowed, but the good news is we anticipated this and took decisive action to bolster the economy." Last month's $152 billion package of tax breaks for workers and businesses, Bush added, "provided the economy with a booster shot" whose impact will be felt "over the coming months."
While placing faith in the stimulus plan, White House officials said they are also considering other measures, including a pay-down program in which the federal government would offer low-interest loans to financially pressed homeowners to bring down their mortgage costs and forestall defaults. Bush's economic advisers said they have downgraded their short-term forecast and now expect the first quarter to be the "weakest," but they expect stronger growth by summer.
The economic troubles stem from a crisis in debt markets that developed last August and touched off a wave of home foreclosures. Despite efforts by the Federal Reserve to cut interest rates, credit has continued to tighten, making it harder for businesses to raise capital to expand operations and for Americans to pay off credit cards and buy homes or cars.
Although the unemployment rate edged down from 4.9 percent to 4.8 percent in February, the jobs report alarmed policymakers in Washington because the losses proved worse than Wall Street predictions. The Labor Department said the economy lost 52,000 manufacturing jobs and 39,000 construction jobs last month, continuing deep losses over the past year. The only reason the overall report was not worse was the addition of 38,000 government jobs.
"The short-term discussion ought to be what does this mean for economic policies, what kind of anti-recessionary policies do we need to start crafting, what is the impact of the policies we've crafted so far?" said Jared Bernstein, a scholar at the liberal Economic Policy Institute. The long-term issue, he said, may be "to what extent is our current situation a result of Bushonomics? That's really going to be fodder for the campaign."
Rea S. Hederman, an economist at the conservative Heritage Foundation, said the report may not signal the need for additional government action because it will take time for the stimulus package to have an impact. "We've already diagnosed the problem," he said. "We've already tried one remedy. Let's at least see if that works."
Rising economic anxiety dominated the day on the campaign trail. Sen. Hillary Rodham Clinton (D-N.Y.), who won the Ohio presidential primary this week in part on the strength of support from voters worried about the economy, took aim at both Bush and her rival, Sen. Barack Obama (D-Ill.).
The numbers "are painful reminders that we need a president who is ready to be a steward of our economy starting on Day One," she said. And referring to Bush, though not by name, she said, "It's going to take more than tax rebates to avoid a deep economic downturn." Clinton renewed her call to extend unemployment insurance, invest to create jobs, and impose a 90-day moratorium on foreclosures and a five-year freeze on subprime mortgage interest rates.
For his part, Obama cited the everyday Americans he meets on the campaign trail while lumping Clinton in with the Republicans as part of the problem. "They can't afford John McCain's promise of four more years of the very same failed Bush economic policies that have failed us for the last eight," Obama said, "and they can't afford another politician who promises solutions but won't change the divisive, lobbyist-driven politics in Washington."
McCain, a senator from Arizona and the presumptive Republican nominee, said that "many American families are hurting very badly." He called for cutting corporate taxes, repealing the alternative minimum tax and making Bush's tax cuts permanent. Although he once said that "I still need to be educated" about economics, McCain defended his experience, saying he has been involved in such issues for 25 years.
Campaigning in Atlanta, he said, "It's pretty obvious the economy is on most people's minds now and is clearly the greatest challenge that we face" -- an acknowledgment of how the issue has transformed a race once expected to center on Iraq, terrorism and national security, all issues on which McCain would rather debate his eventual Democratic opponent.
Just 19 percent of Americans consider the economy in good shape, the most negative the public has been in 15 years, according to the latest Washington Post-ABC News poll. Thirty-nine percent named the economy the top issue, nearly four times as many as in September.
Bush aides dismissed the Democratic criticism as predictable campaign-trail rhetoric that ignores the president's record of 52 straight months of job creation, ending in December. "Two candidates for president who are duking it out in the Democratic primary are no doubt going to make charges against this president, even if they don't ring true," said White House press secretary Dana Perino.
White House economists continued to resist the recession label but said this will be "the worst time," until tax rebate checks of $600 for most workers go out in May. "We have definitely downgraded our forecast for this quarter," said Edward Lazear, chairman of the White House Council of Economic Advisers. "I'm still not saying that there is a recession. There is no denying that when you get negative job numbers, realistically the economy is less strong than we had hoped it would be."
Polling analyst Jennifer Agiesta contributed to this report.