Brian Jacobsen

Employment and the election: Don’t confuse cause and effect

AdvantageVoice® Blog—11-2-12
Brian Jacobsen, Ph.D., CFA, CFP®, Chief Portfolio Strategist

Nonfarm payrolls rose 171,000 in October, but the unemployment rate increased to 7.9%. Retail and health care experienced the biggest job gains, while mining had the biggest losses. The average workweek and average hourly earnings did not change from September. There were positive revisions to the August and September numbers, with August nonfarm payrolls revised up 50,000 and September revised up 34,000.

The reason we can see nonfarm payrolls increase and the unemployment rate go up is because these numbers come from two different surveys. Nonfarm payrolls come from surveying businesses, while the unemployment rate comes from surveying households. In the household survey, the number of people employed increased, but so did the number of people unemployed. This happens when people who were outside the labor force—perhaps because they stopped looking for work—re-enter the labor force.

One notable theme throughout the employment situation report was the use of the phrase, “little changed.” Whether it was the average workweek, the number of jobs in the manufacturing sector over the past few months, or the unemployment rate, the Bureau of Labor Statistics said these numbers are essentially unchanged. That’s the story of the past few months: The economy seems a bit directionless. Although unchanged, things can change pretty quickly. Maybe the election on Tuesday is the focal point that business owners are waiting for to decide where in the world they want to deploy their accumulated liquid assets and profits.

Whether the employment numbers are good or bad for the president or the challenger is probably the wrong question to ask. The numbers themselves won’t determine the election. Sure, some people might let today’s report make up their mind about whom to vote for, but I doubt that’s a significant number of people. The numbers don’t cause people to vote a certain way. To say they do is like saying the thermometer causes the weather. An unemployment rate at these levels has not historically been good for a sitting president, but a lot of historical patterns have seemed to breakdown over the past few years.

The views expressed are as of 11-2-12 and are those of Chief Portfolio Strategist Brian Jacobsen, Ph.D., CFA, CFP®, and Wells Fargo Funds Management, LLC. The information and statistics in this report have been obtained from sources we believe to be reliable but are not guaranteed by us to be accurate or complete. Any and all earnings, projections, and estimates assume certain conditions and industry developments, which are subject to change. The opinions stated are those of the author and are not intended to be used as investment advice. The views and any forward-looking statements are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any mutual fund. Wells Fargo Funds Management, LLC, disclaims any obligation to publicly update or revise any views expressed or forward-looking statements.


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