Today, the Labor Department released its second to last jobs report before the presidential election. If voters were voting on the economy alone, a close election would be predicted with the incumbent gaining strength. Back in June, I proposed a five part test to judge today’s job market, and found that the labor market was falling short. A closer look shows that the job market is stronger than the headlines indicate.
Jobs
Grade: Needs Improvement
At peak capacity, the economy would add 200,000 jobs per month to absorb population growth and provide jobs for all Americans who want to work. By adding 158,000 jobs in September, the market continues its modest paced march forward and is strong enough to slowly bring more Americans off the sidelines.
Wages
Grade: Satisfactory Progress
Economists look for 3.5 to 4 percent wage growth as what is needed to move the needle on living standards and inequality as we did towards the end of the 1990s expansion. Wages grew by $0.06 cents in September, amounting to 2.6 percent over the last year, short of the target but amounting to modest real gains because of still low inflation and gas prices.
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Labor Force Participation
Grade: Satisfactory Progress
One of the most vexing parts of the recovery is that it has not attracted millions of Americans who have given up on looking for work. The good economy, and not a decline in quality of video games, pulled workers back in, with the labor force participation rate climbing up to 62.9. Overall, there are a substantial 3 million more Americans in the workforce than a year ago.
Involuntary Unemployment Rate
Grade: Satisfactory Progress
As I’ve examined before, underemployment (workers can’t secure the full time jobs they want) is a bigger problem today than unemployment (which has been 5.0 percent or less for twelve months in a row). In October, the underemployment count dropped by 159,000 Americans, the first drop since June.
Long-term Unemployment
Grade: Unsatisfactory Progress
Historically in a healthy jobs market, most unemployed workers can find a job within six months of being laid off before their unemployment benefits run out. The recovery still can’t push the long-term unemployment rate (the share of jobless workers out of work for six months or more) below 20 percent. That’s a mark reached in every other jobs recovery since statistics have been compiled, but the rate is still at a too high 24.9 percent.
By this scoresheet, the labor market is stronger than the last time we graded it in June, getting passing grades by three of these measures. Whether it’s fair or not, Americans judge presidents on the performance of the economy, and President Obama’s approval rating has risen as the recovery has lengthened. Labor market conditions matter for elections. The table below shows the unemployment rate going into the last fifty years of elections. The incumbent party has held the presidency four out of the six times the unemployment rate has been below 6 percent like it is today, but lost it four of the six times the unemployment rate has been over 6 percent. With the unemployment rate standing at 5 percent in September, recent experience would suggest favorable odds for an incumbent party even during this so-called “change election.”
Table 1. Unemployment Rates and Presidental Elections, 1968-2016
Not surprisingly, the grade that American voters are giving the incumbent party depends on how the economy is treating their family and their community. The math below relates real wage growth over the the Obama presidency to recent polls. Overall, Hillary Clinton leads Donald Trump by 5 percent in those states where wages have growth above average since the last presidency. Donald Trump is ahead of Clinton by 4 percent in the states with below average wage growth. Donald Trump is leading by an average of a whopping 12 percent in the 8 states that have negative wage growth since Obama took office.
Map 1. Wage growth and election year polls
While there are many factors at play in presidential preferences and huge divides in voter attitude by race, we can’t forget the role of the economy. It is hard for those of us living in fast growing big cities to remember that much of the country is struggling to adjust to an economy recovering from the recession and the loss of manufacturing to jobs due to trade policy and technological change. Economic change has been particularly harsh to white workers without college degrees that have been receptive to Trump’s message. Until the economy can consistently deliver shared prosperity, we can expect dissatisfaction with the status quo to be a major factor in U.S. elections. As we get ready for the home stretch, we can only wait and see whether the economy coincides with the voters’ ultimate verdict.
Jobs Report Sends Average Grade as Election Looms
Today, the Labor Department released its second to last jobs report before the presidential election. If voters were voting on the economy alone, a close election would be predicted with the incumbent gaining strength. Back in June, I proposed a five part test to judge today’s job market, and found that the labor market was falling short. A closer look shows that the job market is stronger than the headlines indicate.
Jobs
Grade: Needs Improvement
At peak capacity, the economy would add 200,000 jobs per month to absorb population growth and provide jobs for all Americans who want to work. By adding 158,000 jobs in September, the market continues its modest paced march forward and is strong enough to slowly bring more Americans off the sidelines.
Wages
Grade: Satisfactory Progress
Economists look for 3.5 to 4 percent wage growth as what is needed to move the needle on living standards and inequality as we did towards the end of the 1990s expansion. Wages grew by $0.06 cents in September, amounting to 2.6 percent over the last year, short of the target but amounting to modest real gains because of still low inflation and gas prices.
Sign up for updates.
Labor Force Participation
Grade: Satisfactory Progress
One of the most vexing parts of the recovery is that it has not attracted millions of Americans who have given up on looking for work. The good economy, and not a decline in quality of video games, pulled workers back in, with the labor force participation rate climbing up to 62.9. Overall, there are a substantial 3 million more Americans in the workforce than a year ago.
Involuntary Unemployment Rate
Grade: Satisfactory Progress
As I’ve examined before, underemployment (workers can’t secure the full time jobs they want) is a bigger problem today than unemployment (which has been 5.0 percent or less for twelve months in a row). In October, the underemployment count dropped by 159,000 Americans, the first drop since June.
Long-term Unemployment
Grade: Unsatisfactory Progress
Historically in a healthy jobs market, most unemployed workers can find a job within six months of being laid off before their unemployment benefits run out. The recovery still can’t push the long-term unemployment rate (the share of jobless workers out of work for six months or more) below 20 percent. That’s a mark reached in every other jobs recovery since statistics have been compiled, but the rate is still at a too high 24.9 percent.
By this scoresheet, the labor market is stronger than the last time we graded it in June, getting passing grades by three of these measures. Whether it’s fair or not, Americans judge presidents on the performance of the economy, and President Obama’s approval rating has risen as the recovery has lengthened. Labor market conditions matter for elections. The table below shows the unemployment rate going into the last fifty years of elections. The incumbent party has held the presidency four out of the six times the unemployment rate has been below 6 percent like it is today, but lost it four of the six times the unemployment rate has been over 6 percent. With the unemployment rate standing at 5 percent in September, recent experience would suggest favorable odds for an incumbent party even during this so-called “change election.”
But the incumbent party winning the election when the unemployment rate is as low as is today is no sure thing. Some argue there is not a consistent statistical correlation between the unemployment rate and the success of the incumbent party, based on a longer time frame. More successful models have found a stronger relationship between growth in overall household income and international peace and election results. As one labor leader told me, unemployment is 100 percent if you are experiencing it and 0 percent if you are not. Wages and income are something that every voter is grappling with.
Not surprisingly, the grade that American voters are giving the incumbent party depends on how the economy is treating their family and their community. The math below relates real wage growth over the the Obama presidency to recent polls. Overall, Hillary Clinton leads Donald Trump by 5 percent in those states where wages have growth above average since the last presidency. Donald Trump is ahead of Clinton by 4 percent in the states with below average wage growth. Donald Trump is leading by an average of a whopping 12 percent in the 8 states that have negative wage growth since Obama took office.
Map 1. Wage growth and election year polls
While there are many factors at play in presidential preferences and huge divides in voter attitude by race, we can’t forget the role of the economy. It is hard for those of us living in fast growing big cities to remember that much of the country is struggling to adjust to an economy recovering from the recession and the loss of manufacturing to jobs due to trade policy and technological change. Economic change has been particularly harsh to white workers without college degrees that have been receptive to Trump’s message. Until the economy can consistently deliver shared prosperity, we can expect dissatisfaction with the status quo to be a major factor in U.S. elections. As we get ready for the home stretch, we can only wait and see whether the economy coincides with the voters’ ultimate verdict.
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Tags: jobs report, unemployment, hillary clinton, donald trump, 2016 election