WASHINGTON — Pressure on President Obama to do something about the weakening economy intensified Friday when the government reported that hiring last month remained lackluster and the nation's unemployment rate actually inched higher.
With congressional elections less than eight weeks away and Democrats being blamed for the economic malaise, Obama appeared in the Rose Garden to announce that he will soon unveil a new package of tax cuts and other incentives to spur employment.
"We are confident that we are moving in the right direction, but we want to keep this recovery moving stronger and accelerate the job growth that's needed so desperately," the president said.
But the steps Obama will propose — in a speech Wednesday in Cleveland — are likely to have only modest impact, at least in the near term: extension of research and development tax credits for business, more spending on highways and other infrastructure projects, plus continuation of the middle-class portion of the Bush administration tax cuts that are set to expire at the end of the year.
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With Republicans lined up solidly against the administration on economic policy, more far-reaching proposals are considered out of the question and the administration is not expected to risk a high-profile defeat so close to the election, despite the severity of the nation's economic problems.
Assessing the outlook for a package that would have significant economic impact, Heidi Shierholz, an economist at the Economic Policy Institute, said, "The key will be whether it's smart — getting bang for the buck — and if it's big enough. And I'm concerned on both of those fronts."
One larger-scale idea that has received some support from Republicans is a three-month payroll tax holiday for all workers and businesses. That would amount to a 6.2 percent tax cut for each, freeing up money that employers could use for new hiring and workers could use to boost consumer spending.
But White House aides indicated that Obama will not embrace the idea. It would cost the government about $120 billion in lost revenue if adopted for two months — and $700 billion if continued for a full year.
Also, an unrestricted tax holiday would not be narrowly focused on Obama's goal of adding jobs.
"I think the notion of giving payroll tax holidays is not very well-targeted," said Gary Burtless, an economist at the Brookings Institution think tank in Washington. "That's going to go to all kinds of firms — even those that are reducing their employees."
Instead, Alan Krueger, the Treasury Department's chief economist, said Obama asked his economic team to "review options that are targeted and responsible" — that is, more narrowly focused and less likely to aggravate the government's budget and deficit problems.
Among the narrower options under consideration is extending a tax break signed into law in March that exempts employers from their share of payroll taxes for the remainder of 2010 and provides other incentives if the employer hires someone who has been unemployed for at least 60 days.
The law, known as the Hiring Incentives to Restore Employment Act, or HIRE, passed with bipartisan support and one of its main backers, Sen. Charles Schumer, D-N.Y. recently urged a six-month extension.
A White House aide, Jen Psaki, would not lay out specifics, but said "the options under consideration build on measures the president has previously proposed...."
The moves being discussed are unlikely to change the jobs picture any time soon, Burtless said. He noted that the research and development tax credit, which expired on Dec. 31, has repeatedly been renewed and is expected to be extended again this year.
Although the economy technically has been recovering since last summer, hiring has been so sluggish that 15 million American workers remain jobless this Labor Day weekend.
In August, the Labor Department said, the jobless rate inched up to 9.6 percent from 9.5 percent in the previous month. It was the first increase in the unemployment figure since April, and came as the nation lost another 54,000 net jobs — with manufacturing cutting back for the first time this year.
Even so, many analysts considered the report as relatively encouraging. The net monthly drop in payroll jobs reflected the dismissal of 114,000 temporary census workers. The private sector actually added a net 67,000 jobs in August — mainly in health and education services and temporary-staffing firms.
The government also revised higher the private-sector job gains for June and July, boosting the two-month total to 168,000 from 102,000.
"It provides at least some evidence that the economy is showing signs of life... groping for stabilization as opposed to deteriorating," said Anthony Chan, chief economist at J.P. Morgan Private Wealth Management in New York.