Washington — The U.S. economy delivered a blow to President George W. Bush's re-election effort yesterday, as job creation fell well below expectations after a week of surging oil prices and a stock-market slide.
Mr. Bush has repeatedly said while campaigning that economic growth is "strong and getting stronger," but the U.S. Labour Department reported that only 32,000 new jobs were created in July, the lowest monthly total since last December. Economists last month predicted the figure would be more than seven times as high.
With Mr. Bush and Democratic challenger John Kerry running neck and neck in opinion polls, the Bush campaign has been counting on a burgeoning economy and a feel-good factor from rising payrolls to blunt the impact of prolonged war in Iraq.
Instead, he now faces a recovery short on jobs, record world oil prices and a sagging stock market.
As the price of crude oil rose to a record $44.77 (U.S.) a barrel in New York trading yesterday, stock markets around the world were sent reeling as fears grew about the impact of high energy prices on economic growth. Both the Standard & Poor's and technology-heavy Nasdaq stock indexes dropped to their lowest levels so far this year. Meanwhile, the U.S. dollar fell against all major world currencies, including the Canadian dollar.
Adding to the economic gloom, the Labour Department reported that the average hourly wage in July was $15.70 (U.S.), up 1.9 per cent over the previous year, but well below the 3.2-per-cent inflation rate.
"This has to be worrisome to the President," said Stephen Hess, a political analyst and senior fellow at the Brookings Institution in Washington.
Mr. Bush tempered his message yesterday while campaigning in New Hampshire. "I'm not going to be satisfied until everybody who wants to work can find a job," he told supporters. "We're in a changing economy, and we've got more to do."
In Missouri, Mr. Kerry was quick to capitalize on the weak jobs report. "The President keeps saying we've turned the corner," he said. "But unfortunately today's job numbers further demonstrate that our economy may be taking a U-turn instead."
Analysts said U.S. voters are sensitive to economic swings.
"Pocketbook issues remain central to the way people think about their voting decisions, even in a time of war," said Karlyn Bowman of the right-wing American Enterprise Institute. "This kind of figure could have a big impact."
Republicans are "pretty nervous," said Peverill Squire, a political scientist at the University of Iowa, located in a state where the race is extremely tight.
"What's weighing against the President is that the economy has perked up a little bit but not a lot," he said. "This just feeds into people's larger sense that maybe things aren't progressing as well as we might have hoped several months ago."
The economic figures are not all bleak. Consumer confidence figures are up and, according to a separate, though less reliable, survey of households released yesterday, the jobless rate fell to 5.5 per cent from 5.6 per cent from June to July.
As is usually the case with statistics, both sides can use numbers to support their positions. The Democrats can point out that the U.S. economy has lost 1.1 million jobs since Mr. Bush took office in early 2001, while the Republicans can argue that 1.5 million have been created over the past year.
Unless there's a sudden surge in job growth over the next few months, Mr. Bush will likely have the dubious honour of being the first president since Herbert Hoover in 1932 to report a lower total level of employment on Election Day than he had on entering office four years earlier. Mr. Hoover lost that election to Franklin Roosevelt.
In their campaign, the Democrats have stressed plans for tax credits to encourage job creation and a national health-care plan. Mr. Bush, appealing to patriotism, leans more heavily on the threat from terrorism and the war in Iraq.
But polls on public perceptions indicate that both Mr. Kerry's lead on economic issues and Mr. Bush's advantage on security issues have been narrowing.
Ray Fair, a Yale University economist who says he can predict election outcomes using key economic indicators, believes Mr. Bush retains an edge because of strong overall growth this year and low inflation.
But he acknowledges that he has always used the gross domestic product, which usually moves in lock-step with job creation, as a main indicator.
"This time is unusual in that we've had rather strong output and rather bleak job growth," Prof. Fair said, his way of characterizing what Democrats would call a jobless recovery.
Presidential historian Allan Lichtman of American University said Mr. Bush has been hoping for "an old-fashioned recovery," where growth in the GDP is followed by a few hundred thousand new jobs every month. But that hasn't materialized.
"Somehow, I've got a sense that the numbers are so skittish that neither side knows quite how to play it," Prof. Lichtman said.
He also believes that opinion polls at this point in the campaign are virtually meaningless. "The big picture is very fluid," he said.
