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**ECONOMY MECHANICS** econ. low
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**ECONOMY MECHANICS**econ. lowAction now is critical --- the economy is beginning to slip significantly Coy, 6/1 --- Bloomberg Businessweek's economics editor (6/1/2012, Peter, “The U.S. Economy Slips Below the 'Mendoza Line'” http://www.businessweek.com/articles/2012-06-01/the-u-dot-s-dot-economy-slips-below-the-mendoza-line, JMP) The U.S. jobs machine underperformed even the most pessimistic forecasts in May, adding just 69,000 jobs. The lowest estimate of 87 economists surveyed by Bloomberg was 75,000, with a median of 150,000 and an optimistic top estimate of 195,000. The unemployment rate ticked up to 8.2 percent from 8.1 percent in April. The worse-than-mediocre job growth is a big blow to the reelection campaign of President Barack Obama, who has been touting the economy’s gradual recovery from the worst recession since the Great Depression. Even with the latest job gain, the economy has regained only 3.9 million of the 8.8 million jobs that were lost in the deep recession that ended in June 2009. May’s job growth was the smallest increase in a year. The U.S. economy has “slipped back under the Mendoza line,” JPMorgan Chase (JPM) Chief U.S. Economist Michael Feroli said Thursday, before the jobs report came out but after another discouraging report—the news that the U.S. economy grew at an annual rate of just 1.9 percent in the first quarter. The Mendoza line is baseball lingo that has made the jump into business. It’s a reference to Mario Mendoza, a shortstop for Pittsburgh, Seattle, and Texas in the 1970s and 1980s whose batting average (below .200 in five of his nine seasons) has come to stand for the dividing line between mediocrity and badness. Each of the past three years, job growth started strong and then faded. In 2010 there was a peak in March and April; in 2011 the strongest period was February, March, and April; in 2012 it was January and February, when the economy added well over 200,000 jobs. Economy is weak --- risk of falling into recession Morici, 6/4 --- economist and professor at the Smith School of Business, University of Maryland (Peter, 6/4/2012, “Depressed by a US jobs stalemate,” http://www.businessspectator.com.au/bs.nsf/Article/US-jobs-US-economic-recovery-US-unemployment-pd20120604-UWRHY?opendocument&src=rss, JMP) The US economy added only 69,000 jobs in May – only about half of what is needed to keep up with natural population growth. The unemployment rate rose to 8.2 per cent. In the weakest recovery since the Great Depression, nearly the entire reduction in unemployment since October 2009 has been accomplished through a significant drop in the percentage of adults working or looking for work. Some of these folks returned to the labour market in May; consequently, unemployment ticked up a tenth of a percentage point. Growth slowed to 1.9 per cent in the first quarter from 3 per cent the previous period, and was largely sustained by consumers taking on more car and student loans, business investments in equipment and software, and some inventory build. The housing market is improving and that should lift second quarter residential construction a bit but overall, the economy and jobs growth should remain too slower to genuinely dent unemployment. The May jobs report indicates growth could be even slower in the second quarter, and the economy is dangerously close to stalling and falling into recession. Manufacturing added 13,000 jobs. Other big gainers were health care, wholesale trade, and transportation and warehousing. Construction lost about 28,000 jobs, and other big losers were leisure and hospitality and state and local governments. In other sectors, jobs gains were weak or small numbers of jobs were lost. Economy declining --- unemployment is increasing Espo, 6/2 (David, 6/2/2012, “US economy souring, so what's a Democrat to do?” http://www.seattlepi.com/news/article/US-economy-souring-so-what-s-a-Democrat-to-do-3604267.php, JMP) WASHINGTON (AP) — Five months before the elections, the uneven economic recovery is sputtering and job growth is anemic. Stock prices are down to 2011 levels and news on the European debt front is menacing. What's a Democrat to do? Ride it out, as President Barack Obama tried to do on Friday in the aftermath of particularly dreary economic reports. "We will come back stronger," he said in Golden Valley, Minn. "We do have better days ahead." Or conjure fears of an even worse fate. The Republicans' "only plan is to hand more tax breaks to millionaires, Big Oil, special interests and corporations that ship jobs overseas," said House Democratic leader Nancy Pelosi of California. Whatever the merit of Obama's optimism or the truth of Pelosi's charge — one was challenged by Republican presidential candidate Mitt Romney, the other by GOP congressional leaders — no Democrat was claiming they can take the place of a strong economic recovery when it comes to the party's political fortunes. Yet after 3½ years in office and uncounted battles with Republicans, it isn't obvious what type of stimulus measures might be available to Obama and his allies in Congress. "Businesses have pulled in their horns, given the growing amount of uncertainty," said Sung Won Sohn, an economics professor at California State University. He said the administration and Congress must immediately address a "fiscal cliff" approaching at year's end. That's when tax cuts first enacted during the administration of George W. Bush are set to expire, across-the-board spending cuts are scheduled to take effect and government borrowing is due to hit the debt ceiling. The Congressional Budget Office estimates that expiration of the tax cuts and implementation of automatic spending cuts would "represent an additional drag on the weak economic expansion." The result would be a 1.3 percent economic contraction in the first half of 2013 and "probably be judged to be a recession," it said. It's a threat that Sohn and others cited Friday as a reason that companies are putting the brakes on hiring. Yet Obama and Republicans have staked out dramatically different positions on tax cuts and spending reductions, and barring a change, there is no significant possibility of compromise legislation before the November elections to address any of the issues raised by Sohn. Obama and most Democrats want to allow tax cuts expire at year's end for wealthier wages earners as a way to cut future deficits. Republicans generally oppose any tax increases. Both sides seem content to submit their disagreement to the voters this fall. On spending, Republicans want to avoid the across-the-board reductions cemented into place last fall when the two sides failed to agree on an overall plan to attack the nation's ever-escalating debt. The GOP warns that the impact of the cuts on the Pentagon would be detrimental to the nation's security. Democrats accuse Republicans of seeking deeper reductions in social programs and are opposed. That issue, like taxes and a possible increase in the debt limit, probably will be handled in a postelection session of Congress this fall, if not in 2013. The short-term outlook turned gloomy late last week. The Labor Department said the economy produced only 69,000 jobs in May, the fewest in a year. The unemployment rate rose from 8.1 percent to 8.2 percent. No president since Franklin D. Roosevelt in the Great Depression has won a new term with joblessness that high. The construction industry cut 28,000 positions, its worst monthly performance in two years. Manufacturing activity slowed, although a measure of new orders rose to a 13-month high in a suggestion of better times ahead. Sales of new homes climbed 3.3 percent in April to the second highest level in two years, but the rate is still just half the level that economists consider healthy. The Dow Jones industrial average dropped 200 points and closed down for the year. .
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