Obama Paralyzed by Limp Economy, Broken Politics

NEW YORK (TheStreet) -- Stagnation is marking the economy and inaction is paralyzing the political process. And there may not be an improvement in the next four months. How does that affect the chances of President Barack Obama and Republican rival Mitt Romney?

A June jobs report Friday capped the weakest quarter in about two years. The economy created only 80,000 jobs, the third straight month of sub-100,000 growth. The unemployment rate remained unchanged at 8.2%.

"The one thing that tends to stick out with this report is it's in line with the general slowdown in terms of jobs creation you've seen with the last couple reports," said Doug Roberts, chief investment strategist at ChannelCapitalResearch.com. "It kind of locks the market in a trading range for the foreseeable future."

After the 2012 elections, market analysts and political strategists expect Congress will address the so-called fiscal cliff. Lawmakers can allow a number of tax increases and spending cuts that could drive the economy into a recession, or do nothing and risk a higher deficit, which also could torpedo the economy.

"We have this fiscal cliff at the end of the year, and the election is obviously in November; to what extent does the market start to price that in, how much concern is there?" said Brad Sorensen, market and sector research director at Charles Schwab. "We've continued to see companies talk about the uncertainty with the tax structure and the regulatory structure that seems unlikely to change at least through the second half of 2012."

Critics argue that the Republican Party won't cooperate with the president and Democrats to address expiring tax cuts, pending spending reductions and other potential fiscal drags because inaction would likely keep the economic climate at status quo -- lethargic.

It's important to consider a few elements at play. From a market perspective, investors are searching for any sign of stability. As politicians in the U.S. and Europe avoid tough fiscal decisions, markets during the second quarter of 2012 were volatile and offered little to gain.

From a company perspective, businesses have shown timidity with little signal from Congress as to how it intends to solve significant tax questions. In other words, without concrete policy from Capitol Hill, businesses are afraid to invest in new labor, equipment and other resources.