Economy continues shedding jobs, posing challenge for Obama, Democrats

Oct. 8 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the U.S. is involved in a "dangerous game" with its stimulus strategy. Greenspan spoke yesterday at the foreign-exchange FX10 Conference in New York sponsored by Bloomberg LP, the parent of Bloomberg News. Erik Schatzker and Deirdre Bolton report. (Source: Bloomberg)
By Michael A. Fletcher
Washington Post Staff Writer
Friday, October 8, 2010; 10:56 PM

The nation's economy continued shedding jobs in September, as modest increases in the private sector were offset by steep losses in government employment, the Labor Department reported on Friday.

The unemployment rate remained at 9.6 percent in the final jobs report before the midterm elections. It marked the 17th consecutive month that the nation's jobless rate has been above 9 percent, sharpening the challenge facing President Obama and congressional Democrats, whose policies have failed to produce significant new hiring.

"We have yet to make a real dent in unemployment, and now we are entering the holiday season anxious about how consumers will respond," said Christine Owens, executive director of the National Employment Law Project.

House Minority Whip Eric Cantor (R-Va.) used the tepid jobs report to again blast Obama's economic policies - which are supported by many congressional Democrats - as not doing enough to create jobs.

"Over the past two years, the policies pursued by the president and Democrat leaders in Congress have created a cloud of uncertainty and fear that has inhibited productivity, innovation and job creation," Cantor said in a statement.

Speaking at a masonry company in Bladensburg, Obama trumpeted the gains in private-sector job growth, although he acknowledged that the overall employment picture remains troubling.

"Yes, the trend line in private-sector job growth is moving in the right direction," Obama said. "But I'm not interested in trends or figures as much as I am interested in the people behind them, the millions of honest, hard-working Americans swept up in the one of the most devastating recessions of our lifetimes."

Obama again called for greater infrastructure investments. He also chastised Republicans for delaying legislation that would provide tax incentives to encourage small-business growth. And he repeated his call to extend the George W. Bush administration's tax cuts for family income below $250,000 while allowing the rates for income above that to rise.

Overall, employers cut 95,000 jobs in September. Private firms added 64,000 jobs, but the loss of temporary census jobs and increasing cuts by state and local governments resulted in the the elimination of 159,000 government positions.

As they grapple with the effects of declining property tax revenues, the winding down of federal stimulus aid, and more people on social service rolls, local and state governments are likely to slash employment for the next several years, some analysts say.

"Given the constraints on governments at the local and state level, they are likely to continue to be a drag on overall employment," said Christopher Molumphy, chief investment officer with the Franklin Templeton Fixed Income Group.

The jobless rate captured only one dimension of the nation's continuing employment problems. The number of people involuntarily working part time increased by 612,000 in September to 9.5 million, the government reported.

The nation's 14.8 million unemployed people have been out of work an average of 33.3 weeks, and nearly 42 percent of the unemployed have been out of work for at least six months.

Men continued to bear the brunt of the unemployment problem, with an overall unemployment rate of 9.8 percent, compared with 8 percent rate for women. The unemployment rate for 16.1 percent for blacks, 12.4 percent for Hispanics, 8.7 percent for whites and 6.4 percent for Asians. All of those rates were little changed from August.

The continued job woes only deepened the paradox confronting Obama and the Democrats. Their policies - which included the huge economic stimulus package passed in early 2009 and numerous targeted job-creation measures - have helped reverse the worst economic slide in eight decades, but they have failed to produce the level of recovery needed for robust job growth.

"An increase in overall joblessness even when the rate doesn't change can't be considered good news for the party in charge of bringing down unemployment," said Robert J. Shapiro, a former Clinton administration official and chairman of Sonecon, an economic consultancy.

When economic growth seemed more robust earlier this year, the White House and its Democratic allies embraced the good news with gusto. The news, they said, was evidence of the effectiveness of their policies, and they heralded the coming "recovery summer."

But many analysts say the Obama administration's policies should not be blamed for the sluggish pace of growth after a recession that spawned complex economic problems.

"Consumers are feeling gloomy because of their diminished wealth," said Chris Clarke, chief executive of Boyden, a global executive search firm. "As long as consumers are feeling gloomy, they are going to sit on their wallets."

Republicans criticize Obama's policies for not doing more to change that mood.

"With each passing month and each new jobs report, it becomes increasingly clear that while massive Washington spending is growing the size of government, it's clearly not growing sustainable private-sector jobs," said Senate Minority Leader Mitch McConnell (R-Ky.).

With midterm elections a month away, some Democratic analysts say Obama and his allies have not adequately prepared the electorate for the nation's economic reality - painfully slow growth that's likely to continue.

"The job numbers point out the White House's central conundrum," said Chris Lehane, a Democratic consultant. "The president has done an effective job of making sure we did not slide into the next Great Depression. But absent the articulation of a broader big idea that people buy into, it is a challenge to tell people things could be worse and that we are headed in the right direction long term."

© 2010 The Washington Post Company