BARACK Obama’s re-election hopes were given a boost on Friday with a strong non-farm payroll print, coupled with a significantly improved unemployment rate. With less than a month until the US presidential elections on 6 November, the crucial employment survey gave the Obama camp an unbelievable fall in unemployment – falling to 7.8 per cent from 8.1 per cent in August and 8.3 per cent in July.
The 7.8 per cent figure brings the jobless rate below the level when Obama took office in January 2009. The serendipitous nature of these numbers has raised a few eyebrows – most publicly those of former General Electric chief executive Jack Welch, who accused the Chicago machine of manipulating the numbers to make up for Obama’s poor debate figures. But conspiracy theories aside, it is worth delving deeper into the non-farm figures.
The headline jobless figure is an important one, and has the potential to influence whether Barack Obama will be ousted by Mitt Romney, his Republican opponent. It also has an impact on US monetary policy. The open-ended quantitative easing programme unveiled by the Federal Reserve in September committed the central bank to monthly asset purchases of $40bn (£24bn) “until a substantial improvement is seen in the US labour market”. But underneath the headline grabbing number, the quality of those jobs and the cyclical nature of the labour markets make this number not all that it seems. The biggest jobs increase came from part-time workers – up by 582,000 in September. But the U6 unemployment rate – often seen as more inclusive as it also counts the number of people who have given up looking for work, as well as those in part-time work but looking for full-time work – has been stuck at the 14.7 per cent mark for a number of months. That the world’s largest economy is becoming a nation of part-time employees is a worrying trend, not just for policy makers, but for world markets that rely on US demand.
PUNTING ON MITT
The election in a month will undoubtedly move markets, but how much and in what direction is difficult to judge. An analysis of Democratic and Republican tax change proposals by JP Morgan suggested up to a 14 per cent gain if Republicans win and a 14 per cent drop if Obama remains in the White House. However, if you fancy your election winning predictions more than your stock picking, Sporting Index currently gives a spread of 13.5 to 15 points for Romney to be the next President of the United States and 315 to 320 points for Obama to win the electoral college ballot.