No jobs

US jobs: The US economy added no jobs in August. For believers, that provides fresh impetus for stimulus, both fiscal and monetary. Neither has much credibility, based on recent history. But even proponents of such efforts must know the 9.1 per cent jobless rate won’t come down in a hurry.

The details of Friday’s employment report were marginally positive, although the downward jobs revisions for June and July were disquieting. Private sector employment was affected by a strike at Verizon, which caused 45,000 temporary job losses. Adding those back, the private sector gained 62,000 jobs. Still, the trend is sluggish, workforce participation is significantly down over the past year, and long-term unemployment remains worse than that in any post-war recession.

Politically, the failure to generate any jobs in August is fuel for President Barack Obama’s critics. But it is also pure gold for stimulus enthusiasts in his administration and at the Federal Reserve, both of which have forthcoming opportunities to push new measures. The president is due to address the Congress on jobs on September 8, and the Federal Open Market Committee will meet on September 20 and 21.

Though no one can be sure what would have happened without them, neither fiscal nor monetary stimulus has proved conclusively effective, at least in recent iterations. Signs of short-term boosts from the former have quickly faded; the latter has brought banks ultra-cheap money but produced no great increase in lending to small business, a big generator of new jobs.

Meanwhile, low interest rates may have encouraged capital investment over hiring, holding back job creation. And the recent surge in regulatory activity could itself be contributing to employment sluggishness, either by adding costs or by creating uncertainty. The president’s decision on Friday to block an Environmental Protection Agency air quality rule is a nod in that direction, though arguably one grounded primarily in politics.

Both Obama and Fed still appear inclined toward further stimulus, if they can secure the needed backing. But with the scale of any fiscal activity limited by politics and monetary policy facing diminishing returns, the job creation results are unlikely to be gratifying. The long-term unemployed must wait longer for significant relief.