Coming four days ahead of Election Day, Friday’s employment report will be the final read on the labor market before voters head to the polls. In a tight race, almost any event might be viewed as crucial.
Both parties will be attempting to spin the data in their favor to help sway voters trying to decide between giving President Barack Obama another four years in office or to change course with Republican challenger Mitt Romney.
The Department of Labor confirmed Wednesday the October jobs report will come out on Friday at 8:30 a.m. as originally scheduled, despite earlier uncertainty surrounding the timing of the report after Hurricane Sandy closed government offices.
The state of the U.S. economy is at the forefront in this election, but recent economic data has been a mixed bag. While manufacturing and exports are showing significant weakness, consumer spending and confidence are on the rise. Moreover the devastated housing market seems to have finally turned the corner. Homebuilders have become increasingly optimistic, inventory continues to be drawn down and prices are edging higher.
Employers are expected to have added 125,000 jobs to their payrolls in October, up from 114,000 in September, according to economists surveyed by Thomson Reuters. The data won’t be affected by Hurricane Sandy because the surveys of employers and households were conducted in the middle of the month, before the storm struck.
In the past six months, job growth has averaged about 110,000 and jobless claims have remained range-bound.
The politically-sensitive unemployment rate is forecast to tick up a tenth of a percentage point to 7.9 percent in October after a dramatic 0.3 percentage point fall in the prior month.
The big eye-opener in September’s jobs report was the 873,000 people in the household survey that claimed they had found jobs -- the largest increase since June 1983, excluding the annual Census benchmarks. The household survey is used to calculate the unemployment rate, and the massive jump far outstripped a 418,000 rebound in the size of the labor force, which caused the jobless rate to plunge.
“Those looking at October’s employment data through a political lens will be paying particular attention to the alternative household measure of employment,” said Paul Dales, senior U.S. economist at Capital Economics.
There are a number of “theories” as to why the household survey showed stronger job growth (two-thirds of which were part-time positions) than the establishment survey, which measures the number of people paid by a large sample of businesses.
Bank of America Merrill Lynch economist Ethan Harris noted that a reasonable explanation was that the large gain in part-time workers and teenagers was driven by campaign workers. “If this is the case, the gain is unlikely to reverse in October, in fact, it could potentially increase further,” Harris said, adding that there were likely other factors pushing up household jobs, which could reverse given the volatility in the data.
With only days to go, it appears that the outcome of the presidential election is still very much up in the air. While some polls give one candidate a lead and others show his rival ahead, most of the results are within the so-called margin of error.
A positive report would undoubtedly be hailed by Obama as proof that his policies are working and justification for another term in the White House. A disappointing report would add fuel to Romney’s criticism of the president’s economic policies.