Applicants wait during a job fair at the Southeast LA-Crenshaw WorkSource Center in Los Angeles, November 20, 2009.REUTERS/Mario Anzuoni

WASHINGTON  - President Barack Obama turns his attention on Thursday from Afghanistan to the battle against unemployment which has sapped his popularity and may shape his political future.

Obama is hosting a forum with business leaders at the White House to discuss how to boost jobs after U.S. unemployment hit a 26-year peak of 10.2 percent in October. But the gathering has been dismissed by critics as a public relations exercise.

The president's public approval ratings have dipped as joblessness has grown, alarming members of his Democratic party who face congressional elections next year. Republicans say his economic recoveries policies have failed to deliver.

Democrat losses in the mid-term polls could hinder Obama's ambitious legislative agenda, especially if Democrats lose control of one or both houses of Congress.

On Friday, he will visit Allentown, Pennsylvania, the first stop on a White House to Main Street jobs tours that caps a busy week in which Obama also announced the deployment of 30,000 extra troops to Afghanistan.

Critics charge the jobs summit is more about politics than policy, and the president has already stressed the need for low-cost solutions that rule out a second stimulus package.

Only about a third of the $787 billion in the emergency spending bill Obama signed in February has been spent so far. Financial markets could react badly to much more government spending that adds to the record $1.4 trillion deficit.

Policies that provoked an investor-scare could also lead to a run on the dollar and force up borrowing costs, choking off the recovery. Obama recently acknowledged the threat of a double-dip recession if the deficit was not tackled.

That's why the White House has stressed that the forum will focus on what the private sector can do.

When businesses seem hesitant to hire and productivity is surging, we need to harness the private sector,, Christina Romer, chairwoman of the White House Council of Economic Advisers, wrote in the Wall Street Journal on Tuesday.

Company executives attending the forum will include the chiefs of Google Inc, AT&T Inc, Quest Diagnostics Inc, FedEx Corp and Comcast Corp.

U.S. economic growth swung positive in the third quarter, ending the most prolonged economic slump in 70 years, but companies have boosted output by squeezing greater productivity from existing workers rather than adding to payrolls.


Some economists dismiss the deficit threat as less damaging than social effects of persistent high unemployment.

I am very critical of deficit fetishism, said Nobel laureate economist Joseph Stiglitz, who is taking part in the forum at Obama's request. 

The long run cost of not addressing this issue is greater than the (deficit) cost imposed on our society by a long shot. I think that it is not a close call, he said.

Stiglitz and other like-minded economists argue that the value to society of investment in education and infrastructure trumps any problems caused by adding to the deficit.

The White House has highlighted green jobs that improve energy efficiency and incentives to help small businesses.

Dean Bank, co-director of the Center for Economic and Policy Research Co-Director in Washington, recommended Obama consider direct public service job creation and aid to states to help them avoid laying off civil servants. He also favored granting employment credits to help firms that would otherwise trim their workforces to keep their payrolls intact.

However, critics said that this measure, like other tactics to ease the pain of joblessness such as extending unemployment insurance, would not help the economy in the long run.

You can argue that you need to do this on a humanitarian basis. It is not going to reduce unemployment, said James Sherk, a fellow at the conservative Heritage Foundation.

He said unemployment was rising mostly because of a steep decline in new hiring rather than due to layoffs. The number of new jobs fell by 1.9 million in the first quarter of 2009 compared with the final three months of last year.

Create an environment that is conducive to risk-taking, he said.

(Editing by Alan Elsner)