Today's jobs report doesn’t look likely to tip the election in favor of either President Barack Obama or Republican challenger Mitt Romney. That's just as well, because monthly employment statistics all too often send false signals about the state of the economy.
Both candidates will find something to like in the report. The estimates published by the Bureau of Labor Statistics suggest nonfarm employers added 171,000 jobs to their payrolls in October -- a headline number that the Obama camp can point to as an indicator of a strengthening recovery. It brings the three-month average growth in payrolls to 170,000, a pace more than adequate to offset natural growth in the labor force and bring down the unemployment rate.
The Romney camp, for its part, can tout the slight rise in the estimated unemployment rate, to 7.9 percent from 7.8 percent, as a sign of the president's failed policies. That wouldn’t be entirely fair: The rate rose because of an increase in the estimated number of people in the labor force, which in turn boosted the number of people counted as unemployed. The BLS household survey, which is used to calculate the unemployment rate, actually showed a gain of 410,000 jobs.
Voters, however, shouldn't draw any major conclusions from the jobs report. We still don’t really know how many jobs were created last month, or what the unemployment rate was. As Bloomberg View has noted, the statisticians at the BLS are trying to measure very small changes in very big numbers, so their estimates have large margins of error.
When, for example, the BLS says nonfarm payrolls grew by 171,000, it means it's 90 percent confident the actual number is somewhere between 80,000 and 262,000. Similarly, if the reported unemployment rate is 7.9 percent, the true rate could be anywhere between 7.7 percent and 8.1 percent. October's 0.1 percent reported rise in unemployment is not statistically significant.
To get a sense of how misleading the monthly data can be, consider the payroll number for the month of August. In early September, the BLS reported that only 96,000 jobs were added in August -- a poor result that took a toll on Obama's campaign the day after his acceptance speech at the Democratic National Convention. Today, the BLS reported a revised number of 192,000 jobs, but the damage is long since done.
All told, the latest jobs data don’t much change the broader picture of the U.S. economy. It's recovering, but too slowly to prevent the kind of permanent damage that long-term unemployment can do. The next president will face the difficult task of getting more people back to work while convincing the world that the government can get its longer-term finances under control. That's a tall order for whoever wins, because it will require cooperation in a polarized Congress and sacrifice from the rich and middle class alike.
(Mark Whitehouse is a member of the Bloomberg View editorial board. Follow him on Twitter.)
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