Poor jobs data fails to spur Congress into compromise

WASHINGTON (Reuters) - It takes a lot to jolt the U.S. Congress into action, especially in an election year when partisanship runs highest, and the dismal May jobs report apparently is not enough.

Friday's employment data - described by investors as "awful," "horrid" and "ugly" - marked the third straight month of slowing job growth.

But it is not spurring Congress to accelerate work toward a grand fiscal bargain. Washington's tax and budget deadlock persists, despite hopes that an early deal would give businesses certainty over tax rates and halt automatic government spending cuts that could sap growth, according to lawmakers and aides interviewed on Monday.

Nor has the jobs data, which showed the U.S. unemployment rate rising for the first time in nearly a year, caused Republicans and Democrats to soften their differences over a long-delayed transportation construction bill that could help create a slew of new jobs.

Instead, lawmakers were sticking to their plan of letting the November 6 elections decide which party should shape the country's budget and tax policy, leaving it until after that vote to pass major legislation in a mad-dash to December 31.

Thus, Democrats and Republicans seemed content on Monday to dig deeper into partisan positions and blame each other for the U.S. jobs malaise.

"Republicans have acted with urgency on jobs, passing nearly 30 bills that would help encourage economic growth and job creation," said Kevin Smith, a spokesman for Republican House of Representatives Speaker John Boehner. "Unfortunately, these jobs bills are gathering dust in the Democratic-controlled Senate."

Democratic Representative Allyson Schwartz shot back: "Republicans have chosen to pass bills that are basically campaign rhetoric that they know are going nowhere. That's not getting us where we need to go to help Americans find jobs."

The May jobs data released on Friday showed employment growth slowing to a paltry 69,000 jobs - less than half of what economists had forecast.

President Barack Obama, trying to contain the damage to his re-election hopes, demanded Congress act on his jobs "to-do list," which includes tax credits for small businesses and federal aid to help states prevent layoffs of teachers, firefighters and other public employees.

Analysts said Obama can expect little help from lawmakers on these plans, which would likely do little to change the jobs outlook in the six-month run-up to the election anyway.

"The odds are against anything before the election," said Greg Valliere, chief political strategist at the Potomac Research Group, a private firm that tracks Washington for institutional investors.

HANGING ONTO FISCAL CLIFF

Individual tax cuts enacted under former President George W. Bush are set to expire on December 31, and days later, automatic spending cuts arranged in last year's debt limit deal are due to hit in a series of deadlines dubbed the "fiscal cliff."

The Congressional Budget Office warned last month that these tax hikes and spending cuts would slam the U.S. economy back into recession in the first half of 2013.

To avoid this, lawmakers are trying to lay the groundwork for a deal that also could include broad tax reform.

But Republicans and Democrats are far apart on key demands. House Republicans plan to vote this month to extend all current tax rates into next year, but the effort is expected to stall in the Senate, where Democrats want tax rates on the wealthy to rise.

Democrats demanded that new tax revenues be part of any deficit reduction and tax reform deal, while Republicans demand major cuts in so-called entitlements such as the Medicare and Medicaid health care programs for the elderly and the poor.

In fact, these positions form the basis of key campaign themes for each side - for Republicans, to slash Washington spending and lower all tax rates, and for Democrats, to preserve Medicare benefits while asking the wealthy to shoulder a greater share of the tax burden.

"All this does is cement them into their positions," Steve Bell, an analyst with the Bipartisan Policy Center, said of the May jobs data.

For lawmakers haggling over a transportation bill that could create hundreds of thousands of construction jobs, the story is similar. Democratic congressional aides said the jobs data shows the need for quick passage of a bill without controversial provisions that could slow it down, such as the Republican plan to force approval of TransCanada Corp's Keystone XL oil pipeline.

Republican aides insisted that it shows the need to pass Keystone because they say it would create thousands of jobs and help boost the economy.

Things could change if the U.S. jobs picture continues to worsen over the summer, increasing pressure on Obama to show more positive action to generate jobs and economic certainty.

So far though, neither side is hinting at concessions.

A Democratic aide, blaming Republicans for failing to pass any of Obama's jobs initiatives over the past two years, said: "It makes you wonder if they are rooting and cheering for bad job reports leading up to the election."

Ryan Loskarn, chief of staff to Republican Senator Lamar Alexander, blamed the dismal jobs report on government takeovers, regulation, record federal budget deficits and a threat of tax increases during Obama's tenure.

"They ought to stop doubling down on bad ideas that make it harder to create jobs," Loskarn told Reuters.

(Additional reporting by Roberta Rampton, Richard Cowan, Donna Smith and Thomas Ferraro; Editing by Vicki Allen)

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