Bleak jobs data keep economy at center stage

After Friday’s jobs report was released, both campaigns were quick to acknowledge voters’ economic concerns.

“While millions of Americans are gathering around the kitchen table and questioning how they can keep their homes, pay their medical bills and afford their children's education, Washington has failed to act,” said McCain, who formally accepted his party’s nomination Thursday. “As I promised last night, I will fight for those that lost their jobs, savings and real estate investments.”

In his statement, McCain said he would promote a “Jobs for America economic plan that creates jobs, helps small businesses, expands opportunities and opens markets to American goods.” He also said “the last thing we should do is raise taxes as Barack Obama plans to do and has done. The American people cannot afford a Barack Obama presidency."

The Obama campaign shot back, saying McCain is “intent on continuing the economic policies that just this year have caused the American economy to lose 605,000 jobs” and noted that “the typical working age family's income is down $2,000 since George Bush took office, and their purchasing power is as low as it's been in a decade.

“John McCain's answer is more of the same: $200 billion in tax cuts to big corporations and oil companies, and not one dime of tax relief to more than 100 million middle-class families,” Obama said in a prepared statement. “If I am president, I will cut taxes for 95 percent of all working families and provide an immediate $50 billion to struggling states so that they don't have to cut back on health care and education and can rebuild roads and schools.”

So far this year, the economy has held up surprisingly well, given all the headwinds.

One reason may be the continued gains in productivity of American workers. The Labor Department reported Thursday that in the second quarter productivity rose at an annual rate of 4.3 percent.

That’s great news for the Fed because it relieves some of the inflation pressure brought by rising commodity prices. Higher productivity means companies can make more of their product for the same cost, which helps them absorb some of the higher cost of raw materials.

But it’s not great news for American workers who are, in effect, working harder for the same wages. In fact, the report showed that unit labor costs fell a half-percent in the second quarter. The number of hours worked shrank by 0.8 percent, and wages, when adjusted for inflation, fell by 1.3 percent. That helps explain why, even as the economy has been able to post weak growth this year, American workers feel like they’re losing ground.

Job losses are expected to continue for the remainder of the year, according to Joel Prakken, chairman of Macroeconomic Advisers.

“We do view the economy as facing very significant challenges in the second half of the year,” he said, “particularly the consumer sector where house prices are still falling, equity prices are low, gasoline prices, while falling recently, are still high, and labor income, given these employment reports, is falling.”

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