Economists say slow economic growth evidenced by jobs report is becoming more problematic

Alexis Levinson Political Reporter
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Economists agree that the jobs report Friday morning, showing non-farm payroll growing by only 54,000 jobs and the unemployment rate at 9.1 percent, is not a good sign and that the incredibly slow rate of growth of the economy is causes problems.

“It’s an anemic report,” said economist Larry Kudlow.

Kudlow pointed to the household survey, which he says is a more telling factor than the non-farm payroll. That survey “covers the self-employed, and the mom-and-pop business owners … entrepreneurs.” That number went up by only 105,000 in May, according to the jobs report Friday, and has fallen by 299,000 since the beginning of what Kudlow calls the “so-called recovery” in mid 2009.

“That’s not a recovery,” he said.

“We’re not going into a double dip,” he noted. “We’re looking at 2 percent growth. But we should be growing at 7 percent.”

“We’re not creating jobs,” he said, adding that “the energy spike, the energy price shock and the commodity price shock is basically eating into the economy.” For this he blamed the Federal Reserve and stimulus spending.

Kudlow said that without more substantive reforms to regulation and the tax code, the economy would be in trouble. Businesses, he said, are too scared to take the steps necessary to grow the economy.

“They’re surviving, but not expanding. That’s what the numbers show,” he said.

On the political side, he said, “this is looking like a disaster for the president… He’s in trouble, and he knows it.”

Douglas Holtz-Eakin had a similar take.

(As employment dips, what 2012 candidate profiles rise?)

“Near-term politics,” he said, “this is unambiguously bad for the administration; the president in particular, Democrats in general.”

“And,” he added, it “probably weakened their hand as those arguing for a particular economic philosophy.”

“I don’t think this is a harbinger of a double dip, but it certainly is not good news,” he said, noting that he had been among the overly optimistic, expecting jobs to come in around 100 or 150 thousand.

The economy is growing too slowly, he said, to be able to sustain damage inflicted from outside sources.

“You get oil price shocks … or you get financial instability in the European Union,” he said, by way of example. “When you’re growing slowly you can’t afford any bad news.”

He said the country needed policies promoting faster growth, “so you can absorb some of the hits” because, he said, “the hits are inevitable.”

Other economists voiced similar opinions that the slow rate of growth was becoming increasingly problematic.

“It is now pretty clear that the economy ran into a brick wall last month. The extent of this slowdown is becoming a big concern,” said Paul Ashworth, chief U.S. economist for Capital Economics.

“Economic activity has clearly hit a soft patch,” said Steven Wood, chief economist for Insight Economics, in an article reported by AP. “The open question is whether this is temporary and will quickly reverse itself over the next couple of months or whether this is an adjustment to a slower permanent growth rate.”

Nonetheless, others saw the fact that it was still growing, albeit slowly, as a good sign.

“The bottom is just not falling out of this economy,” Ken Goldstein, an economist at the Conference Board, told US News. “It’s an economy that’s bobbing in choppy water. It’s not sinking; it’s just bobbing through the waves.”

The projections for when unemployment will drop to levels considered more acceptable, in the 6 or 7 percent range, are not particularly confident. According to the Wall Street Journal, the Conference Board predicted that the even at the end of 2012, the rate of unemployment will only be as low as 8.5 percent.