A drop in the unemployment rate below the psychologically important 8 percent mark may blunt some of Mitt Romney's postdebate momentum, but it is unlikely to swing huge numbers of voters toward Obama.
Surprising economists who thought that unemployment would tick higher, the jobless rate fell to 7.8 percent in September, the lowest level since January 2009 when Obama took office.
“What this does for Obama is that it gives him an opportunity to ... put a bit of a brake on the shifting momentum that was garnered by Governor Romney in the debate,” said David Gordon, head of research at political risk consulting firm Eurasia Group.
The overall impact of Friday’s report on the presidential race is going to be small, political analysts said. Voters tend to consider economic trends rather than one or two data points just before the election. In fact, those numbers could be among the least significant of the 2012 campaign. David Rothschild, an economist at Microsoft Research found that late-breaking numbers have diminishing returns for incumbents. “It’s first- and second-quarter changes that really make a difference…. At this point, it’s very hard to shape that narrative,” he said.
Former chief economists to Presidents George W. Bush and Obama agreed in side-by-side CNBC interviews on Friday: The September report is only one data point, and the economy is not improving quickly enough.
“This one month is nothing to write home about,” said Edward Lazear, who served as chairman to the President's Council of Economic Advisors under Bush. Payroll growth of 114,000 shows the labor market is “barely treading water,” he said. The longer-term trend is more telling.
Austan Goolsbee, who chaired the CEA under President Obama, agreed: “Ed is exactly right. You want to take multiple months.… We should take some heart that the numbers are improving, but they’re not improving fast enough.”
Romney said in a statement after the report that the drop in the unemployment rate did not alter a broader picture of an economy that is not firing on all cylinders. “Under President Obama, we’ll get another four years like the last four years. If I’m elected, we will have a real recovery with pro-growth policies that will create 12 million new jobs and rising incomes for everyone,” the Republican candidate said.
Economists said the overall report contained more bright spots than expected, even though nonfarm payrolls expanded by 114,000, a fairly tepid pace of growth that was in line with analysts' expecations. The report showed upward revisions to payroll growth in July and August by roughly 40,000 jobs each. Coupled with the decline in the unemployment rate, that made for a report that “was considerably stronger than expected,” Jim O’Sullivan, chief U.S. economist at High-Frequency Economics, wrote in a research note.
While the 0.3 percentage-point drop in unemployment was generally unexpected, it reflected a volatile survey, economists said. It “could be statistical; it could be just noise,” said Deutsche Bank chief U.S. economist Joseph LaVorgna. The drop, he said, probably “grossly overstated” the extent of improvement in the labor market.
“Data moves around on a monthly basis, what you want to be doing is looking at the overall trend,” said Heather Boushey, senior economist at the Center for American Progress, a liberal think tank. “When you look at the trend, [the unemployment rate] is right on the trend that we have been on.”
And despite the decline in the headline unemployment rate, the overall jobs numbers remain high. The unemployment rate in 2007 averaged 4.6 percent; today’s is 3 percentage points above that. And payroll growth actually declined in September, from a revised 142,000 in August to 114,000 last month.
Friday’s report, then, is “good news, not great news, [and] probably not a fundamental change in people’s perceptions of where the economy is,” said Christopher Wlezien, a political science professor at Temple University. “Maybe the biggest effect will be on changing the news cycle.”
While the report might have only a small effect on the presidential race, the final jobs report of the campaign—arriving on Nov. 2—is likely to have even less of an impact. It’s tough for a jobs report to break through the noise, particularly that close to the election. “A huge percentage of Americans [will] have already voted, there’s going to be a massive amount of other news involving elections coming through and… [the numbers] would have to be so incredibly dramatic to break through and to actually impact people’s [votes] in that short period of time,”said Rothschild.
Still, Chicago must be happy.