Jobs Report Shows Pockets of Strength — Unlikely to Change Election Dynamic

Bottom line (from two months ago) still applies today:

Not much to see here. Really. The full takeaway is an improved report compared to the poor prior months but there is softness underneath the top-line results in a continuing weak economy. Regarding political implications, due to the current weak state in the economy, this jobs report and the next three before the election will only confirm preconceived views on the economy and/or the President absent a breakout report (high or low) above 200-250k or below 0.

The US economy added 114,000 jobs in September, and the unemployment rate dropped to 7.8%. Rather than participate in conspiracy theories (Jack Welch should be ashamed of himself), let’s look at the reality of this jobs report.

Remember, there are 2 surveys here

The payroll numbers and unemployment figures are obtained by separate surveys—they sometimes diverge in the short-term but generally move in the same direction. The unemployment rate is obtained in a survey of households, which tends to be more variable because of a smaller sample size. Previously, changes in the rate have reflected people dropping out of the work force. That wasn’t the case in September.

Household survey versus non-farm payrolls

The volatile Household survey which had a couple bad months prior to this survey caught up in a big way this month.  That is not an unusual phenomenon for that labor component.  873,000 people in the Household survey claiming they have found jobs. This is the largest increase since 2003. That is very good news but it must be tempered by the volatile nature of the survey and the tepid non-farms payrolls report that sputtered along at +114k new jobs, consistent with recent results.

Same amount of people looking for work

Regardless of statistical jumps from accounting issues in the unemployment rate (not fudging, but also not accurate) the drop in unemployment to 7.8% is good for optics but no gain in real world. The Labor force participation rate — the share of people looking for work or working — was little changed at 63.6%.

Jim Baird, Chief Investment Strategist for Plante Moran Financial Advisors, sums it up nicely:

All things considered, today’s report is a modest surprise and the decline in the jobless rate is a positive development for the economy. Nonetheless, the bottom line is that the economy appears to be grinding along at a pace that is universally unsatisfying, and well short of the pace needed to ramp up the still lackluster pace of job creation and promote better household income growth.  There’s no question that the economy remains in a window of vulnerability, with the fiscal cliff looming large on the horizon.

How does this compare in political terms to the re-election campaigns in 1992 and 2004?

Bureau of Labor Statistics; Monthly jobs reports 1992 vs 2004 vs 2012

The graphs are not very distinguishable between these years. Don’t expect too actual political traction to be made by today’s jobs report by either candidate.

12 Comments

  1. Ron
    Posted October 5, 2012 at 9:58 am | Permalink | Reply

    Maybe..(the the graph), but the average Joe looks at the unemployment rate (rather than jobs) as a more determinate of where the “country” is going when it pertains to jobs/economy. I guess at worst, I see this news puts RR at the same point before the debate. More than not, I see this blunting RR’s boost from the debates. The undecided’s may wonder if things are really beginning to turn around. On another note, The Virgina Rasmussen poll has Romney up by 1..

  2. margaret
    Posted October 5, 2012 at 10:17 am | Permalink | Reply

    I don’t think this will blunt any boost, even if it’s trumpeted as some kind of Obama miracle by the MSM. The unemployed and their families are caught up in their tough circumstances. The dropping of numbers by 0.2 or 0.3 isn’t going to change that. They need real jobs.

    I believe 73 million people watched Romney overpower an incumbent president and handily win the debate by looking in command of the stage and presidential. If they were undecided about who to vote for, I don’t think they will be like that now. Optics COUNT.

  3. WillBest
    Posted October 5, 2012 at 11:03 am | Permalink | Reply

    A lot of people have taken to thinking the unemployment rate is bogus, and even the media have taken to talking about labor force participation rate as a more accurate account.

    I supposed Obama cheerleading media will use this to show that his plan really did work but the biggest rise seems to be in part time employment which isn’t a good sign and just continues the trend of lower median household income

  4. Ron
    Posted October 5, 2012 at 11:22 am | Permalink | Reply

    One hope is the distrust of the government by the undecided’s. IF they are smart enough to smell a rat with how conveniently these numbers fell out of the sky, then I think you are correct. The problem is there is a portion who wants to give ole Barry the benefit because he is a “nice guy” and give him 4 more years. The second debate is becoming more important after this jobs report.

  5. Mike
    Posted October 5, 2012 at 12:54 pm | Permalink | Reply

    There are a lot of people that gave up looking for jobs and now what some of them are getting are seasonal part-time or Mcdonald jobs. Yup, this is not an improvement for a regular joe trying to secure a good job. Somewhere, somehow in Washington DC someone is cooking the books with this FUZZY MATH……..

    • jeff
      Posted October 5, 2012 at 1:16 pm | Permalink | Reply

      Sure the numbers are manipulated but people generally vote how they feel. Then there are the high gas and food prices the debt etc. Taken these factors together I highly doubt that todays manipulated employment numbers will make any difference.

  6. Posted October 5, 2012 at 1:16 pm | Permalink | Reply

    The jump in the household survey is the largest since 2003 – SAY WHAT ?????? Since 2003, we’ve had many years which were double the current GDP growth. Why would you say tha this jump is not “unusual”.

  7. Posted October 5, 2012 at 1:19 pm | Permalink | Reply

    What is being completely ignored by the media is the fact that the Fderal Reserve has almost single-hendedly kept the economy alive. Any perceived recovery that is occuring in 2012 has little or nothing to do with the actions of the president or the congress over the last several years.

  8. Kevin
    Posted October 5, 2012 at 1:39 pm | Permalink | Reply

    92,000 jobs were added in August, 114,000 were added in September, a combined 206,000 jobs in two months. That results in an employment rate going from 8.3% in August to the new 7.8% rate.

    Obama and his obedient dogs in the Alinsky Media are trying to tell us that 206,000 jobs added equals a .05% drop in the unemployment rate.

    Yet, 227,000 jobs were added in February, and the unemployment rate remained unchained at 8.3%

    http://money.cnn.com/2012/03/09/news/economy/jobs_report_unemployment/index.htm

    Don’t count on the Alinsky Media to do a compare and contrast.

  9. David
    Posted October 5, 2012 at 2:08 pm | Permalink | Reply

    I do statistics for a living. (It doesn’t sound exciting, I know.) Statistically, the unemployment numbers make no sense. The supposed 873,000 who suddenly found work last month, much of that is probably part-time which is included in the aggregate number. The 7.8% number is more of a reflection of those dropping out of the labor force – they’ve quit looking for work. They’re not deciding to become self-employed because that takes money to get started. Occasionally, statistical numbers come out goofy like this – it is most likely an outlier. If this kind of data came across my desk, I would toss it back to the client with a note indicating the data are unreliable and highly suspect.

  10. Posted October 5, 2012 at 2:42 pm | Permalink | Reply

    I agree with your comment David. Given our anemic growth rate, it is a bizarre outcome to have the highest Household number in 29 YEARS!!

    The reference to the highest number since 2003 appears to be incorrect. The data has not been this high since 1 9 8 3 !!!!!!!

    “If this kind of data came across my desk, I would toss it back to the client with a note indicating the data are unreliable and highly suspect.” >>>>> AGREED, unless I was runnign for re-election 🙂

  11. David
    Posted October 5, 2012 at 7:31 pm | Permalink | Reply

    Reading around late this afternoon, I’ve learned the BLS normally does not include part-timers in unemployment reports. The reason why part-time numbers are not reported is because the number is considered to be unreliable. The margin of error on the part-time number is roughly 50%. The U6 number (total unemployed, underemployed, dropouts) remain around 14.6%. Why the BLS chose to include part-timers this time is very, very unusual.

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