No one except the Wall Street bears will be happy with today’s employment data. The payroll numbers were even worse than feared, with only 54,000 new jobs added in May. Unemployment rose to 13.9 million, a punishing 9.1% of the labor force. At the May rate, jobs are only growing at a 0.5% annual rate, not nearly enough to produce the 3% or so GDP growth rate that we need in order to raise living standards.

The latest slowdown in the economy and job growth is plain bad news for President Obama. Right up through this week, he’s been sticking to his view that more government spending is the solution. 

The data argues the opposite – the more the government spends, whether on so-called investment, entitlements or just plain waste, the less the private sector wants to hire new workers. Businesses realize that government debt puts them at risk.

It’s a huge policy challenge. The Obama administration is running a weak-dollar, big spending policy based on its economic and political assessments when much of the country believes we need the opposite to create jobs. The prime working-age population (age 18-64) has been growing by roughly 167,000 per month and 1% per year. 

May’s job growth is much slower than that, meaning jobs aren’t keeping up with population even though the economy is technically in recovery. We’ll need to quadruple May’s job growth to begin to get a meaningful decline in the unemployment rate. 

Today’s data showed a 0.3% gain in hourly wages in May, but the April gain was revised away. This still leaves severe weakness in wages, up only 1.8% over the last year and well below the 3.2% inflation rate.

Of course, it’s always possible that the president will triangulate toward more growth as President Clinton did in the 1990s. 

To get the economy going, President Obama should call his cabinet together tomorrow with a request that they identify an immediate 7% spending cut for 2012 and a larger amount for future years. He should also instruct Treasury and the Federal Reserve to jettison the weak dollar policy carried over from the Bush administration and instead provide a strong and stable dollar. 

And like Ronald Reagan, he should demand that his huge staff begin work on a tax code upheaval that would lower the rates, broaden the base and cut out 90% of the special provisions and complicated regulations that only make money for lobbyists and tax lawyers. The combination of spending restraint, sound money and hope for an end to the tax code nightmare would attract capital back to the U.S. and stop the talk of a costly bond rating downgrade for U.S. debt.

Above all, the data is a disappointment for the nearly 14 million Americans looking for work during May. On net, only 0.4% found jobs last month. That’s better than the lottery, but is a painful warning that it will take many years to get the country back to work if Washington’s anti-jobs policies – big spending, weak dollar and impossible tax code -- persist.

David Malpass, who worked on debt, tax and growth issues as a deputy assistant secretary of the Treasury in the Reagan administration, is president of Encima Global LLC, which provides economic research for institutional clients.