Morici: Economy Adds New Jobs, Better but Not a Game Changer

The economy added 171,000 jobs in October. That was up from 148,000 in September, but hardly enough to bring unemployment down to acceptable levels.

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The unemployment rate increased to 7.9 percent from 7.8 percent September.

In the weakest recovery since the Great Depression, most of the reduction in unemployment from its 10.0 percent peak in October 2009 has been accomplished through a significant drop in the percentage of adults working or looking for work. Were adult labor-force participation the same today, the unemployment rate would be 9.6 percent.

Adding more than 8 million part time workers who can't find full time work, the unemployment rate becomes 14.6 percent. It rose above 14 percent when Mr. Obama took office and remains stuck there. (Read More: Pre-Election Jobs Report Shows Some Gain; Rate 7.9%)

Convincing millions of Americans they don't want a job or compelling desperate workers to settle for part time work has been the Obama Administration's most effective jobs program.

Growth remained a slow 2 percent in the third quarter, as consumers remained cautious, the trade deficit on oil and with China continued to drag on demand and businesses — concerned about the fiscal cliff, the cost of Obama Care and the grip of regulatory and other anti-business policies — slashed investment. (Read More: What About an Election 'Cliff'? Here's What Could Happen)

Prospects for substantially reducing unemployment remain slim. The economy would have to add about 12.6 million jobs over the next three years — about 349,000 each month — to bring unemployment down to 6 percent. Growth in the range of 4-to-5 percent is necessary to accomplish that.

Recent moves by China to further close its markets to stimulate its own flagging economy, will worsen the trade deficit and weaken U.S. growth without a substantive response from Washington. Similarly, the financial crisis in Europe worries U.S. businesses about a second, even more severe recession and discourage new hiring. (Read More: Euro Zone Unemployment Hits New High)

It is simply not true, as President Obama has claimed throughout his campaign, the economy faces changes more daunting than any time since the Great Depression. Ronald Reagan inherited a similarly difficult situation — unemployment that peaking at 10.8 percent in November 1982 and double digit inflation and interest rates. (Read More: Unemployment Report: Final Fodder for Election)

President Reagan put in place a very different set of stimulus measures — emphasizing private sector leadership — and when he faced the voters in 1984 the jobless rate had fallen to 7.3 percent. During his recovery, GDP growth was averaging a brisk 6.3 percent in contrast to President Obama's 2.2 percent.

Growth is weak and jobs are in jeopardy, because temporary tax cuts, stimulus spending, large federal deficits, expensive but ineffective business regulations, and costly health care mandates — championed by President Obama — do not address the structural problems holding back dynamic growth and jobs creation — the huge trade deficit and dysfunctional energy policies.

Oil and trade with China account for nearly the entire $600 billion trade deficit. Dollars sent abroad that do not return to purchase U.S. exports, are lost purchasing power. Consequently, the U.S. economy is expanding at 2 percent a year instead of the 5 percent pace that is possible after emerging from a deep recession and with such high unemployment.

Governor Romney has promised prompt efforts to produce more domestic oil, redress the trade imbalance with China, curb health care mandates and costs, and relax burdensome regulations would create up to 12 million new jobs, and lower unemployment to more palatable levels.

Peter Morici is an economist and professor at the Smith School of Business, University of Maryland School, and a widely published columnist

Follow Peter on Twitter @pmorici1