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August U.S. Jobs Report Critical for President Obama

By , Contributing Writer, Money Morning •

The August U.S. jobs report is critical on many levels.

Due out tomorrow (Friday) by the U.S. Labor Department, the August report isn't expected to be enough to lower the U.S. unemployment rate.

An uninspiring 120,000 jobs are expected to have been added in August, according to a CNNMoney survey, a notable slowdown in hiring from July's seasonally adjusted 163,000.

July's number was the strongest showing in five months, yet it still was not vigorous enough to keep up with population growth. The unemployment rate actually ticked up a notch to an unhealthy 8.3%.

Here are two reasons tomorrow's U.S. jobs report is a biggie.

August U.S. Jobs Report: What's at Stake?

  • President Obama's Obstacle

    The employment report comes just weeks before the November presidential election. President Obama and his administration have long been blamed for the stagnant and elevated unemployment level, the lack of job creation and as a result, the slow going economy.

    With just three more monthly jobs reports due out prior to the November election, Team Obama could certainly use a boost from better-than-expected numbers. The president is treading at break-even level on jobs and it is very doubtful that the unemployment rate will fall below 8% by then.

    "The soft economic environment that we're having is not going to be good for any incumbent. It's a tough sell for anyone in office," Sam Bullard, a Wells Fargo senior economist told CNN Money.

    No incumbent president has won re-election with an unemployment rate greater than 7.2% since FDR's rein.

    On the other side of things, according to a piece in Business Insider, a top Wall Street source who backs presidential hopeful Mitt Romney said a robust showing in Friday's report bodes well for President Obama. "If the number is good Friday it doubles his [President Obama's] bounce. Maybe triples it. If it comes in really low, it could extinguish it. I don't think there's ever been a more important jobs number, politically, than this one."

    If the report nearly meets or matches the expected 120,000, it "won't matter as much" according to the source.

  • More Stimulus

    The monthly report from the Labor Department comes just days before the Sept. 12 - 13 Federal Open Market Committee (FOMC) meeting. A lackluster report will give the central bank additional ammo to pull the trigger on additional stimulus. The ailing economy and consecutive months of waning jobs numbers portend a third round of quantitative easing, or QE3, is all but imminent.

    Fresh signs tip the balance in favor of such a move. Last week at the Fed symposium in Jackson Hole, WY, Fed Chief Ben Bernanke said that the job market remains a "grave concern" causing "enormous suffering and waste of human talent."

    Market participants, commodity traders and precious metal bugs have been clamoring for such a move for months. But, a third round of QE may not be the magic bullet that many are hoping for. While Bernanke maintains that rounds one and two did goose the economy and create jobs, the ailing economy and stalled recovery hint otherwise.

Romney's Election Edge

A poor jobs report would damage the president's economic policy credibility, and boost Romney's by default, in the eyes of voters.

An Aug. 16-20 Associated Press Gfk Poll revealed that 48% of registered voters said they trust Romney over President Obama (44%) when it comes to economic issues. Romney running mate Paul Ryan has also garnered high marks from business owners.

Also giving Romney an edge is that fact that no incumbent president has lost re-election with an approval rating of at least 49% in the Gallup poll. President Obama's approval rating is currently running 3 points behind where it should be in a match up with Romney.

Yet, in the past 70 years, only two incumbent presidents have lost re-election.

One thing is certain, both Romney and President Obama will be ready to go on attack as well as play defense after the release of the August U.S. jobs report tomorrow at 8:30 a.m. EDT.

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