There have been 45 monthly employment reports since Barack Obama was inaugurated president. Number 46 will be the biggest of them all.
Not in terms of significance for what it tells us about the economy; on that score, every report is about the same. They provide important guidance on whether the job market is getting better or worse, and in something close to real time, but are subject to revision and weird statistical blips, and thus are only one piece of a complex economic puzzle.
Economics writers tend to be dismissive of analyzing jobs numbers through a political lens; ultimately, what determines elections is the overall thrust of the economy and the persuasiveness of the answers offered by competing candidates, not any one month’s data. But the Labor Department’s October report, due out at 8:30 a.m. Friday, is an exception.
Coming four days before voters go to the polls, the headlines out of this report, and their political resonance, could well be more important than whatever it actually tells us about the economy. This close to Election Day, a surprisingly bad report would add potency to Republican presidential nominee Mitt Romney’s arguments that President Obama’s economic policies are a failure. A surprisingly good report would give Obama and his allies evidence that the country is heading the right direction. Either way, the results will hang over the candidates’ closing arguments and dominate a news cycle when some voters might still be out there making their decisions.
Forecasters are expecting numbers that fall somewhere in between those markers, predicting data that matches the dominant economic trend of the last three years: grinding, glacial improvement in a job markets still feeling the impact of the recession.
The consensus among analysts is that employers added 125,000 jobs in October, which would be a slight improvement from the 114,000 reported in September but only about what is needed to keep up with an ever-growing labor force. The unemployment rate, which economists tend to view as a less reliable month-to-month measure of economic progress but which has greater political potency, is forecast to rise one-tenth of a percentage point to 7.9 percent, reversing a steep decline in September.
Looking at a broader set of data in recent weeks, there are plenty of reasons to think that the October jobs numbers will disappoint. Hiring tends to go hand-in-hand with business investment more generally, and the latest numbers on orders for nondefense capital goods excluding aircraft point to stagnation — or worse — in that sector. The number was unchanged in September and has fallen in four of the last seven months. With the fiscal cliff looming — a series of tax increases and spending cuts that will take effect Jan. 1 absent a deal between Congress and the president to avert them — businesses may resist adding workers until they get some clarity.
Already, hiring of temporary employees has dried up; hiring in that sector over the past three months suggests that a weak 72,000 jobs will be added each month in the fourth quarter.
And the sharp improvement visible in the survey of households in the September jobs numbers may turn out to be a overly positive statistical aberration. An additional 872,000 people reported having a job in September’s household survey, which does not square with the amount of hiring that employers reported. It wouldn’t take much to drive the unemployment rate up back to the symbolically important 8 percent threshold.
That said, the recent precedent does not point to that sort of “reversion to the mean” after a steep decline in unemployment. The last three times that the unemployment rate has fallen 0.3 percentage points or more in a single month, as it did in September, it dropped again the following month. (May and December 2010 and January 2011).
The latest round of economic releases Thursday morning fit with these forecasts of so-so, weak economic growth. Payroll processing company ADP estimated that employers added 158,000 jobs, based on hiring and firing by its clients. (ADP also introduced a new methodology for its monthly job market index, which has had an uneven track record in predicting what the official government numbers will show.)
On Thursday, the Labor Department reported that there were 363,000 new claims for unemployment insurance benefits last week, a bit below a revised 372,000 the previous week but consistent with the slow growth seen over the last several months. Similarly, the Institute for Supply Management released its monthly index of activity Thursday, which pointed to more sluggish growth in the manufacturing sector, coming in at 51.7. (Numbers above 50 indicate expansion.)