The jobs numbers are awful, but they’ve also provided fodder for some poor political punditry.
I won’t name names, since the people in question are normally thoughtful writers. But you can already find an article keyed off the news with the headline “How a one-term president is made.” And a political scientist in my Twitter feed wrote of how numbers like these will have Mitt Romney “measuring the drapes” in the White House.
I do not mean to suggest that the unemployment numbers are unimportant as a news story. To the contrary, recent polls find that four times as many people list jobs rather than the budget deficit as a top priority, even though the latter issue has gotten more press attention lately.
But if you’re going to write about the jobs numbers as a horse race story, you ought to do it right, and that means keeping an eye on the big picture.
In fact, looked at in the most literal way — how much President Obama’s re-election chances changed between 8:29 a.m. today and 8:30 a.m., when the numbers were released — the impact is probably quite minor. At the betting market Intrade, the contract on Mr. Obama’s 2012 chances has declined in value only barely, to implying a 57.9 percent chance of re-election from a 58.4 percent chance before the jobs numbers were published.
This was a terrible jobs report — there were no silver linings. But it’s still just one report, and there will be 16 more of them before Mr. Obama faces the voters. The unemployment rate, moreover, historically has a very weak correlation with an incumbent president’s re-election performance. Certainly, that does not mean you should ignore it — but it should be looked at along with other data that gets less attention, like reports on G.D.P. and disposable income and consumer confidence and the inflation rate, each of which have historically had more predictive power.
The employment report is also considered only a moderately important predictor of future economic data, because it can be more of a lagging than a leading indicator. If you’re in the business of trying to predict what the economy will look like in November 2012, you should pay at least as much attention to relatively obscure pieces of data like building permits and manufacturing orders. Or take a shortcut by looking at what people who issue forecasts of macroeconomic performance are thinking.
You should also be paying attention to other employment-related data like the initial unemployment claims report that is released weekly, as well as to jobs reports put out by private agencies. Some of those reports had seemed promising in the last week or two, which is why some economists were expecting a better number from the government. A report by ADP Employer Services, for instance, thinks that private companies added 157,000 jobs in June rather than 57,000, as the government’s statistic suggests. It’s not uncommon for these numbers to diverge, since there is a fair amount of measurement error in coming up with any estimate of job creation (most of the reports are based on surveys of one kind or another). But there’s not usually any immediate way to know which number is right and which is the outlier.
Not that all of the economic news has been good. Most of it hasn’t been: there have been more negative than positive “surprises” lately. The recovery is in some doubt, and many economists have been busy revising downward their forecasts for future quarters. Nevertheless, looking at just one economic report is like trying to determine what’s going on in a baseball game by watching just one at-bat.