NEW YORK ( TheStreet) -- Friday, forecasters expect the Labor Department to report the economy added 113,000 jobs in September -- a monthly pace too slow to return the nation to full employment.
The economy must add more than 375 thousand jobs each month for three years to lower unemployment to 6% and that is not likely with current policies.
Most analysts see the unemployment rate steady at 8.1%, while a few see an increase. The wildcard is the number of adults actually working or seeking jobs -- the measure of the labor force used to calculate the unemployment rate.
Were the labor force participation rate the same today as when unemployment peaked at 10% in October 2009, the unemployment rate would still be about 10%. Were it the same as when President Obama took office, it would be about 11%.
Convincing millions more adults they don't need or want a job has been the Obama administration's most effective jobs program, despite trillions in new stimulus spending, industrial policies, targeted tax cuts, and social programs intended to boost demand.
In 2007, the last year before the financial collapse, the deficit was $161 billion with the Bush tax cuts in place and the U.S. fully engaged in Iraq and Afghanistan. Over the last four years, the deficit has averaged $1.3 trillion -- additional targeted tax cuts, such as the $95 billion in reduced payroll taxes, and new government programs account for most of the rest.
Though Congress may avoid sequestration, some temporary tax cuts, such as reduced Social Security taxes and elements of the Bush tax cuts benefiting high-income families will likely lapse and some combination of savings in entitlements and defense spending will be accomplished. Overall, these would lower the deficit by something in the range of $300 billion.
If reelected, President Obama has promised some additional targeted stimulus spending -- for example, to aid state budgets under the guise of teacher retention, infrastructure projects and additional industrial policies targeted at manufacturing in the alternative energy sector.
When all the dust settles, the deficit will be left approximately where it is in 2012, and more fundamental problems holding back the U.S. economy will not have been addressed. Economists agree that inadequate demand for what Americans make is holding back growth. During the early years of the recovery consumer demand did expand as the household deleveraging process ended; however, too many of those dollars were spent on imports that did not return to buy U.S. exports -- the gap between new imports and new exports was lost demand for U.S. goods and services.