Last month, I wrote a bit about what you might call the bidirectional causality between the unemployment rate and incumbent political fortunes. On the one hand, unemployment affects happiness, and willingness to vote for the current president. But on the other hand, the rate itself is a political weapon, to be used in, for instance, Republican claims of how many successive months America has had unemployment above 8%.
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This morning’s job report is fascinating, in that it illuminates both effects. One not-bad way of judging Obama’s odds of winning the election is to look at his odds on InTrade, which were stubbornly close to 60% for pretty much all of this year. Then, suddenly, in mid September, there was a huge surge. Narrowly speaking, the surge was a result of Obama doing well in important polls. But why were the polls suddenly turning so much in Obama’s favor? Journalists, with their bias towards believing that everything is a result of news, tended to attribute Obama’s newfound popularity to Romney gaffes like his 47% speech. But with hindsight, maybe news had very little to do with it. Maybe the real reason was that according to the household survey, the number of employed Americans grew by 873,000 in September alone.
Which isn’t to say that news is irrelevant when it comes to perceived election odds. For instance, within the first half-hour of the debate on Wednesday, Obama’s InTrade odds fell from 71% to 67%, just on the back of his weak performance. And then, this morning, they spiked right back up again, from 65% to 71%.
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This move is about optics as much as it is about reality: with the unemployment rate now below 8%, a key Republican talking point has been neutralized. And for the wonkier types, Obama can now say that he’s created more private-sector jobs in the past four years than George W Bush created in eight. Indeed, if it weren’t for public-sector job losses — exactly the kind of spending cuts that Republicans claim to love — the unemployment rate right now would have a 6 handle.
Those optics explain the frantic and ignoble conspiracy theories from the Republican side: they’re trying to alter perceptions of the number itself, even if they can’t alter the effect that rising employment has on the electorate’s propensity to vote for Obama. Because it seems as though rising employment is giving a significant boost to Obama’s re-election chances — and that from here on in, it will only be helped by the 7.8% headline unemployment rate. It’s a little bit depressing that 7.8% counts as low, for these purposes, but clearly it does — especially considering that it has come down 1.2 percentage points in the past year. I don’t know how much credit Obama can really take for that, but America, right now, seems to be willing to give him the benefit of the doubt.