US jobless figures key to economic momentum, November vote

Agence France-Presse

Posted at Oct 08 2010 03:01 PM | Updated as of Oct 08 2010 11:01 PM

WASHINGTON - New unemployment figures due Friday are expected to offer a fresh picture of the trajectory of the US economy and perhaps play a crucial role in voter sentiment ahead of key November elections.

The report may offer clues on whether the struggling economy is sinking back toward recession or moving toward a sustained recovery, factors which could influence the November 2 mid-term vote.

The September report from the Labor Department, the last monthly snapshot ahead of the midterm elections, was expected to show an uptick in the unemployment rate to 9.7 percent from the 9.6 percent August rate.

The consensus forecast is calling for a flat reading on nonfarm payrolls for September after a loss of 54,000 jobs in August.

But a number of special factors will make the report complicated to interpret. The jobless rate typically rises in a recovery as more discouraged workers return to the labor force.

And because of a massive loss of temporary government census workers, economists are looking more closely at private job creation. This is expected to show a gain of 74,000 jobs after rising by 67,000 in August.

"While the labor market is certainly struggling as the US expansion continues, the evidence from the employment situation reports over the last few months clearly suggests that there is a very low probability of a double-dip recession," said analysts at Briefing.com.

"Net private payrolls have been positive each month since January... since January, private payroll gains have averaged 95,375. This level is still less than the 100,000 or so needed to support normal labor force growth, but given the severity of the recession it will instill positive support in the recovery by supplying added income into the economy."

The US economy expanded at a tepid 1.7% pace in the second quarter, a sharp decline from the first quarter, when real output increased 3.7%.

Ryan Sweet at Moody's Economy.com forecast a net overall gain of 5,000 jobs, with 90,000 in the private sector offsetting the loss of 75,000 temporary census positions and 10,000 state and local government posts.

Sweet said a good report "could prompt policymakers to delay making further large-scale asset purchases to drive down long rates."

But he argued that to be positive "private employment would have to flirt with gains in the 150,000 to 200,000 range."

US President Barack Obama and his Democratic Party allies will need a strong report to crow about the recovery ahead the vote, in which opposition Republicans are expected to make strong gains and possibly recapture a majority in one or both chambers of Congress.

But few expect Friday's data to show anything to brag about.