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OLBERMANN: Ever after the phrase has lingered at the back of the American psyche, sometimes the front, its origins, although, are less well remembered. They consisted of a sign hung up in Bill Clinton's 1992 campaign office by aide James Carville with four words printed on it: "It's the economy, stupid." Our fourth story on the COUNTDOWN, tonight: After four years of terror in Iraq and partisanship, that sign may prove prophetic yet again. The nation's number crunches expected that the month of July would produce 200,000 new jobs. The actual number total revealed today, 32,000. As our correspondent, Anne Thompson, reports, oops.

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ANNE THOMPSON, NBC CORRESPONDENT (voice-over): The anemic jobs report stunned the experts who saw improving factory orders and growing consumer confidence as reasons to expect a stronger labor market. But, today's report is now igniting fears that the slowdown, described as a soft patch in the economy, may be something more serious.

DR. MARK ZANDI, ECONOMY.COM: At a very minimum, we need to see consistent job growth of 150,000 per month, if we don't get that we're not getting the income gains that we need to sustain consumer spending and the economy going forward.

THOMPSON (on camera): Adding to the concerns, the sky-high price of oil, closing just under $44 a barrel, seeping into all aspects of the economy.

(voice-over): It threatens to dramatically push up home heating oil prices and trucking costs, putting the brakes on growth.

PHILIP VERLEGGER, OIL ANALYST: The rise in prices cuts the amount of money Americans in both business and the home have to spend on other goods, and that has a ripple effect that winds up cutting jobs.

THOMPSON: One of the jobs created last month belongs to Tina Tapera. Once a mortgage underwriter, now a bartender taking home less.

TINA TAPERA, FORMER MORTGAGE UNDERWRITER: I was receiving medical benefits, dental benefits, 401(k), vacation, and then now in the bartending industry I'm making $6.50 an hour plus tips and no benefits.

THOMPSON: Such jobs derided as part of a u-turn in the economy by Democratic presidential hopeful, John Kerry.

KERRY: The jobs that are being created pay $9,000 less on average than the jobs than the jobs we're losing overseas.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: How are you?

THOMPSON: The president campaigning in New Hampshire stressed the economy is moving forward.

BUSH: In the last year we've added about 1.5 million new jobs, the unemployment rate is down to 5.5 percent.

THOMPSON: A job market showing unexpected weakness with potential long-term impact on the recovery and the election. Anne Thompson, NBC News, New York.

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OLBERMANN: To help assess those impacts, joining us now, Paul Krugman, op-ed columnist for the "New York Times," also professor of economics at Princeton. And he is the author of "The Great Unraveling: Losing Our Way in the New Century." Joining us tonight from Washington.

Mr. Krugman, good evening, thanks for coming back on the show.

PAUL KRUGMAN, PRINCETON UNIVERSITY: Good evening.

OLBERMANN: Monthly fluctuations aside, what is the big picture here, and how did it just change with these numbers?

KRUGMAN: Well, the big picture is that over the past 11 months, when we've had job growth, it's pretty -- it's pretty disappointing. It's about 140,000 a month over the last 11 months which is not -- basically just about enough to keep up with population growth. It's not enough to make real progress, so last summer we all agreed we had a really lousy job market and it really hasn't improved significantly since then. We had a couple of really good months and people said, "Well, you know, we've turned the corner, as the president keeps on saying" not apparently knowing the echo of Herbert Hoover, there. But now, it looks as if, well, maybe we haven't turned the corner and this is pretty depressing.

OLBERMANN: Obviously the fervent prayer of this administration has been, let's get back to at least break-even on jobs created before the election. Are these particular numbers, these statistics for July the end of that hope or can it somehow be even miraculously turned around before people cast their ballots on the 2nd of November?

KRUGMAN: It -- he's got only got, I think, two more job reports. I think we're going to get August-September -- no, I'm sorry maybe three more, but it's, in any case, there are -- I'm sorry, well -- anyway -- I'm going in circles. But anyway, there -- no, basically it would take -- it would really take a miracle. It would have to -- you know, the pope would really have to step in here to get -- to get him to positive numbers before the election.

OLBERMANN: Yeah, the October one will come out after the election.

KRUGMAN: That's right.

OLBERMANN: Because it's so early in the -- on the 2nd. But, what would John Kerry do with this mess, if the economy be one? I mean, if the economy beats George Bush is John Kerry suddenly like the Dustin Hoffman character at end of the movie "The Graduate" when he wins back the girl and gets on the bus and suddenly realizes he doesn't have a clue what to do next?

KRUGMAN: Well, there were a whole bunch of things that moderate to liberal economists were urging the Bush administration to do all along, saying -- you know, instead of directing your tax cuts towards people with very high incomes who probably won't spend them, direct them towards people with lower-incomes so they probably will spend them. Give aid to state and local governments, which are -- you know, have budget problems, will spend the money on building roads and repairing schools. And again, put the money in circulation. The typical estimate, from people I talked to, is that this high-end tax cut-centered program, which is what Bush insistently pushed, got about half as much bang for the buck as a more conventional sort of typical things you do to fight a weak economy. So, I think Kerry wouldn't have a hard time coming up with a list of things that historically have worked better than what Bush has tried.

OLBERMANN: Lastly, perhaps not pursuant to these numbers today, but is there anything in the economic situation that suggests an upward trend, an upward health growth in this economy?

KRUGMAN: Business investment is slowly recovering, I mean, the numbers are pretty big, but it's from way down. Yes. But I have to say, there's nothing in there that makes me think that the second half of the year is going to be anything to celebrate.

OLBERMANN: Paul Krugmam, op-ed columnist, "New York Times," professor of economics at Princeton. We thank you again for coming on the program this evening.

KRUGMAN: Thank you.

OLBERMANN: That wraps up the No. 4 story. Up next, we journey into the parallel universe where people go swimming wearing shackles. That's him right above the logo, there, and trust me, he's wearing shackles. "Oddball" ahoy. And later on COUNTDOWN, a reunion in the works. Vili clears the last legal hurdle separating him from his teacher and the mother of his children and the -- boy this -- feel like jumping in the ocean after seeing this.

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Originally broadcast, 8.6.04