In the minutes from its June meeting several Fed policymakers warned that the economy could worsen due to a number of factors, including Congressional failure to avert tax hikes and deep spending cuts that start at the end of this fiscal year. In addition, the minutes revealed a deep concern that Europe’s debt crisis will continue to hamper U.S. growth.
Some of the weaknesses highlighted included the following:
- The economy created 80,000 jobs in June, which is the third consecutive month of weak job reports. The unemployment rate stands fixed at 8.2 percent, which is also a conservative estimate of the true and much larger toll taken during this so-called jobless recovery.
- Employers added an average of 75,000 jobs a month in the last quarter, and only 1/3 of the 225,000 jobs a month created in the first three months of the year, showing that hiring and job creation has slowed to a near standstill.
While several Fed Members claimed the economy might continue to grow moderately, that assessment was significantly weakened last week when the Fed lowered its growth forecast due to the weak labor market and slow consumer spending. The Fed also stated that it does not expect the unemployment rate to fall any further this year, so the fact that unemployment remains significantly high has put the economy squarely at the center of this presidential election, a fact that will unlikely change between now and November when voters cast their ballots for two radically different economic perspectives.
Despite criticism that President Obama’s economic policies are doing little to help, and may be harming economic growth, the Romney alternative of returning America to the economic policies that initiated a decade of corporate greed, followed by the Great Recession, seems less viable than sticking to the course Obama has laid out.
The President sharpened his differences with Romney this week on the campaign trail, claiming in no uncertain terms that voting for Romney would be putting the same people back into power that helped create the economic mess. That message will be hard to sell the closer we get to the election as voters’ inevitably vote with the vicissitudes of their pocketbooks rather than their reflective conscience.