From time to time economists like to get reports to take America’s economic temperature. The reports vary from consumer confidence to manufacturing surveys to earnings reports from major corporate players. One of the most important and most concrete reports used to gauge the economy is the jobs report.

No Jobs In August

The August jobs report revealed that America had created no net jobs in the previous month. A lot of numbers are easily fudged or flubbed or pushed aside, but this one hit American markets like a bullet between the eyes. No jobs created.

The no jobs statement comes with a few small caveats. As CNBC reports there were a few factors that tweaked the numbers, namely the 45,000+ Verizon workers who went on strike in August. However, despite the Verizon drag on the numbers, zero job creation is not good news. America needs to create jobs just to stay level economically due to population growth. A zero job growth month is actually a step back towards recession.

Market Factors

The past month has been anything but stable. Let’s just quickly review the big news items:

1. Debt Ceiling Debate. First the market and American businesses had to deal with the debate over the debt ceiling. The partisan wrangling, threats, ultimatums, and final compromise did little to instill confidence in American employers.
2. The S&P Downgrade of US Credit. A byproduct of the debt ceiling compromise was the downgrade of the US credit rating. Again – the uncertainty created by this unprecedented action created an environment of “wait and see” for many businesses.
3. Continued European Sovereign Debt Issues. The American and European economies are very inter-related. All multi-national corporations are watching with bated breath to see how the European Union will collectively handle the sovereign debt issues surrounding Greece, Ireland, and Portugal. In addition, the worry is that the crisis will spread if banks fail and other countries in the Union (and around the world) are exposed to losses from Greek, Irish, and Portuguese financial institutions.

Fed Doing Its Part

The Fed has been doing everything it can think of to encourage stability. The August jobs report has generated increased speculation that the Fed will respond with Operation Twist. This latest operation is an attempt by the Fed to reduce long term interest rates by increasing the average duration of its balance sheet. In essence, the Fed would sell short term securities for long term securities to drive the long-term rates down.

If successful, Operation Twist could in theory help jobs by lowering long term interest rates and spurring corporate investment. With all of the other factors in play, including the three big news issues above, most corporations continue to wait and see.

Look Ahead to the 4th Quarter and Beyond

The fourth quarter is usually dominated by consumer confidence reports. These reports often come in the form of retail sales reports. It will be interesting to see as the 4th quarter takes shape what consumers make of all the news. Will people be brave enough to open their wallets and spend? Or will job uncertainty and the ongoing housing hangover cause people to close their pocketbooks for the holidays?

As President Obama and Republican Presidential candidates roll out their respective job plans, it becomes clear what will be discussed between now and next November. Jobs, jobs, and more jobs will be the focus of debate as we head into the New Year. With unemployment currently above 9%, and not expected to get much better any time soon, we can expect to be focused on jobs through the next election year.