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By Patrick Sims, (202) 822-1205, email@example.com
Time has run out for the President to get the unemployment rate below 8 percent by Election Day. The U.S. economy added just 80,000 jobs in June, and the labor force participation rate held steady at 63.8 percent. While there are four more jobs reports before the November election, based on our internal model, if the participation rate holds steady over the remaining period, the economy will need to add 219,000 jobs per month for the unemployment rate to fall below 8 percent by Election Day.
To see such a large increase in job growth is highly unlikely, as the economic anxieties that surround the second half of 2012 continue to add to employer uncertainty over whether to fund investments. Expect private sector payroll additions to remain relatively low as we move into the election season.
Additionally, the government sector continues to shed jobs as municipalities feel the ongoing sting from lower tax revenues. Although the 4,000 government jobs lost in June were considerably fewer than the 28,000 that were lost in May, the period of public deleveraging will continue until the private sector regains momentum.
Our attention now turns to the upcoming fiscal cliff. As you’ll see in the soon-to-be released Hamilton Financial Index (mid-July), the U.S. runs the risk of being driven into recession if tax and spending issues are not addressed. This situation is completely avoidable, but will require leadership and tough decision-making. The release of our upcoming report is meant to spotlight this issue and encourage others to act.
For the President, time may have run out to reach his jobs’ objective—however, there’s still time to avoid a reversion to recession.
Patrick Sims directs research at Hamilton Place Strategies.ﾠ Prior to joining HPS, Patrick worked for SNL Financial as a lead research analyst in the financial institutions’ group. ﾠHe holds a degree in finance from James Madison University, and studied EU economic policy at the University of Salamanca, Spain.