Welcome to the jobless recovery, which will amplify anxieties for Democrats already worried about retaining their House and Senate majorities in 2010.

{mosads}“We likely won’t be adding [jobs] until next summer,” said Heidi Shierholz, an economist with the Economic Policy Institute, a left-leaning think tank. She sees the unemployment rate peaking next August at 10.4 percent, leaving little time for Democrats to campaign against the backdrop of a dropping jobless rate.

The September jobs report to be released on Friday is widely expected to bump the unemployment rate to 9.8 percent and report another 180,000 lost jobs.

That’s good news, in that layoffs are slowing; the economy earlier this year was losing more than three times that number of jobs every month.

But it still means more people are out of work, hampering the sales of homes, cars and other goods.

Worse, businesses aren’t hiring, which continues a pattern from the recoveries after the last two recessions in the 1990s and earlier this decade. In both cases, it took a year for the unemployment rate to fall after the recovery began. Businesses used to start hiring workers quickly after a recession ended.

The job losses continue as the Dow Jones Industrial Average flirts with 10,000.
Rising stocks are an early indicator of a strengthening economy, and could help Democrats in some areas of the country, according to David Wasserman, who monitors House races for The Cook Political Report.

The problem is that the help comes in coastal areas where Democrats are already doing well. Wasserman said small towns and rural areas, where Democrats have gained House seats in the last two elections, are less likely to be focused on the stock market over the employment figures.

“Generally speaking, I think unemployment numbers are a much better indicator of whether voters believe the country’s leadership [is] on the right or the wrong track,” Wasserman said.

Behind the jobs numbers lies more unencouraging news.

The nation’s “hires” rate, as recorded by the Bureau of Labor Statistics, stood at a low 3.1 percent in July, the last month it was recorded. That’s an uptick from the 3.0 registered in June, the lowest recorded in the nine-year history of the statistic, but still deadly low.

Temporary workers also aren’t being hired. Businesses generally start layoffs with temps and begin hiring with those workers. But statistics show the number of temporary employees continuing to fall.

“We are not going to be adding jobs in a healthy way anytime soon,” concludes Shierholz.

She and other economists argue things would be worse without the $787 billion stimulus. But convincing the country the stimulus is working as the jobless rate climbs higher will be no small sales job.

Hanging in the balance? Only President Barack Obama’s agenda for the second half of his term. If Democrats are punished by voters next fall, he’ll find it difficult to move any major pieces of legislation through a Congress with dwindling Democratic majorities.

Clunker hangover

The job figures aren’t helping U.S. automakers, which have seen their sales fall in September after the boom of the cash-for-clunkers program.

Edmunds.com projects sales in September will fall 41.1 percent from the previous month. Foreign and domestic companies are slated to release their numbers for September on Thursday.

The drop in sales leads analysts at Edmunds.com to conclude a significant number of people who would have bought cars this fall instead moved their purchases forward to take advantage of the government subsidy. The clunkers program offered buyers subsidies as high as $4,500 for trading in their gas-guzzling auto for a new, fuel-efficient model.

“It took a lot of sales from what would have happened in other months,” said Jessica Caldwell, a senior analyst with Edmunds.com.

She argues the program would have worked better if it had been instigated in March, when the economy might have reached its low point. Instead, the program was launched in late July after automakers had already started to drop incentives and reduce inventory while adjusting to a radically different market.

New models typically come out in the fall, and September can be a busy time when dealers are looking to clear last year’s fleet from the lot, Caldwell noted.

General Motors spokesman John McDonald said his company estimates about 200,000 of the 700,000 customers were people “pulled in” by cash-for-clunkers who otherwise would have bought their vehicle.

“The vast majority were not people in the market for a new car,” said McDonald, who added that the program has had no long-term impact on the auto market.

He said there shouldn’t be illusions that cash-for-clunkers could solve all of the auto industry’s problems. Carmakers are still living through a brutal sales environment; General Motors only expects 10 million to 10.5 million vehicles to be sold this year, fewer vehicles than it estimates fall apart over a year. Its forecast for next year, 11.5 million to 12 million vehicles, isn’t much better.
Much of that forecast is related to the labor market. People who don’t have jobs don’t buy cars.