The party conventions are over, the signs and funny hats are overflowing trashcans in Tampa and Charlotte, and reality returns to center stage in the form of Friday’s jobs report. It’s rare that a single data report matters much. After all, we can’t project a trend from a single data point. The report that the economy added a mere 96,000 jobs in August is an exception. No matter that the unemployment rate fell to 8.1 percent from 8.3 percent—that is only because 368,000 more workers dropped out of the work force, and the labor force participation rate dropped to its lowest level in 30 years. For every worker who found work, four simply stopped looking and joined the ranks of what economists call “discouraged workers.”

Consider some startling numbers,” invites the Lindsey Group in its latest client bulletin. “The number of adult males eligible to work in the civilian economy has expanded by one million over the last year. But the number declaring themselves not interested in working has expanded by roughly the same amount. Overall, if the labor force participation rate was the same as it was a year ago the unemployment rate would still be 9.1 percent – unchanged over the past year.”

Five million of the 12.5 million unemployed workers have been job-hunting without success for over 27 weeks. Most important, over 23 million workers, 14.7 percent of all workers, are either out of work, involuntarily on short hours, or too discouraged to continue the job hunt. To complete the gloomy picture, the job-creation figures for June and July were revised downward by 41,000.

Here’s why this matters. First, it might prove to the majority of Americans that they are right to believe the country is on the wrong track, and that the president is wrong to claim that he is bringing manufacturing jobs back to America—in fact, some 15,000 such jobs were lost in August as the manufacturing sector contracted for the third consecutive month. Diana Furchtgott-Roth of the Manhattan Institute calculates that given the average growth in the labor force, the job-creation rate recorded last month would take 32 years to bring the unemployment rate down to Obama’s promised 6 percent. Only if the economy adds 300,000 every month would the unemployment rate drop to 6 percent by the end of the first year of his second term.

In short, it won’t be easy for the president to defend his massive spending and borrowing to create jobs. In less than four years he has added $5 trillion to the national debt, about half of what all of his predecessors combined managed to pile up in over 200 years.

Unfortunately for Mitt Romney, this bad news is not necessarily good news for his campaign. He chose to ignore the advice of some economists and resurrect the question Ronald Reagan put with devastating effect to the hapless Jimmy Carter some three decades ago: “Are you better off than you were four years ago?” To which the president responds, “You bet we are.” When Obama moved into the White House, the economy was losing 800,000 jobs per month. For the past two years it has been adding an average of around 150,000 jobs. Not as many as Obama says he would like, but “recoveries have ups and downs. The economy is starting to heal,” says Alan Krueger, chairman of the president’s Council of Economic Advisers. Whether the Obama medicine is hastening or slowing the healing process is something voters are being asked to decide.

The second reason this report is so important is that it will enable the Federal Reserve Board’s monetary policy committee to do what Chairman Ben Bernanke hinted in his Jackson Hole speech he and several of his colleagues have been wanting to do: give the economy another boost, using “extraordinary methods” if necessary.

The chairman’s stated goal is a “sustained improvement in labor conditions.” Which is why he may have found worrying a study by the National Employment Law Project, a liberal research and advocacy group. It claims to show that the mid-wage, mid-skill jobs lost during the downturn are being replaced by low-wage, unskilled jobs. Jobs paying about $14 to $21 per hour accounted for 60 percent of the jobs lost between early 2008 and early this year, but only 22 percent of total job growth.

Fed watchers at Goldman Sachs now say that there is better than a 50-50 chance that the Fed will announce further measures to boost the economy when it meets next week, perhaps including (my guess) an announcement that it will keep interest rates at current near-zero levels beyond the end of 2014 date now agreed.

These low interest rates drive investors to seek higher returns on their money by buying riskier assets such as shares and commodities, driving up prices and the profits of traders. But what is good for investors is not necessarily good for consumers. Oil and food are among the commodities that rise in price when the Fed eases, increasing the pressure on consumers’ budgets.

Support for further easing is far from unanimous, even on the monetary policy committee. Those who feel the Fed has done enough argue that the economy is not in sufficiently bad shape to warrant another round of QE3—in effect, printing money—or any extraordinary measures to give the economy a shot in the arm. Consumers have been paying down debt and are stepping up spending. Homebuilders are complaining that they can’t find enough skilled carpenters and plumbers, or workers with the skills required by the latest building technologies to keep up with the demand for new houses. And August auto sales increased by some 20 percent: the average car or truck on the road is now more than eleven years old, and the increased fuel efficiency of new vehicles makes it attractive to replace older ones now that gasoline prices are again on the rise.

Moreover, fear of a recession has receded. The Organisation for Economic Co-Operation and Development predicts that the American economy would grow at an annual rate of 2.3 percent this year. Since the first half rate was 1.7 percent, the OECD is guessing that the economy will chalk up something like a 3 percent growth rate in the second half of the year.

Perhaps best of all, Bernanke might finally get his wish that the politicians bury their hatchets—not in each other’s backs—and cut a deal to avoid the year-end tax increases and spending cuts that would propel the economy over the fiscal cliff. The Bush tax cuts would be left in place, and spending reductions postponed for six months to give the new congress time to fashion a combination of spending cuts and tax increases that will bring the deficit under control.

Of course, wanting to do something to stimulate the economy and being able to do so are two different things. Interest rates are already in negative territory when inflation is taken into account, Bernanke can’t do much to end the uncertainty that has businesses sitting on their cash piles, and he can’t do anything to reduce “the headwinds” to America’s recovery blowing over from Europe and China. But the odds are that he will use all the tools in his monetary kit to boost growth—and invent some new ones.

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