Man Without Qualities

Thursday, October 07, 2004

The Other 97.5%

Tomorrow George Bush and John Kerry will have a chance to discuss material determining about 97.5% of the upcoming election: domestic economic matters. But that doesn't mean tomorrow's debate will necessarilly move the election or polls more than the last one - or at all. Over the years voters have shown a clear pattern of voting their own economic interests as those interests have been personally experienced by the voter - not as they are discussed b the candidates or massed spinning pundits. Moreover, "domestic economy" is to a large extent code for "jobs" and "inflation." The jobs situtation, especially, takes about 6 or 7 months to show up clearly in voter preferences - and that factor has been working strongly but slowly in favor of this incumbent.

But there is still lots to discuss. Oil is way up - but hasn't hit the consumer all that hard, yet. Jobless claims are recently way down.

But tomorrow is a potentially incendiary day for a presidential debate because of this:

Administration - On Jobs, an October Surprise?

By John Maggs
National Journal Magazine


Mark October 8 on your calendar. On the same day that John Kerry and George W. Bush are scheduled to clash in a debate, one of the most potent criticisms of Bush's economic record may lose most of its bite.

On that day, the Labor Department will announce September's unemployment figures, which either will show the job-creation slump of the past several months continuing, or will signal that employment growth is back on track.

More important, October 8 is also the date that the Labor Department squares the previous year's employment estimates with actual experience. And based on hints from other data on pay for workers, some Wall Street economists are expecting a hefty increase in the number of jobs created over the past year under Bush. If so, the final month of the presidential race may play out in a very different economic environment.

It could happen because this race is, unlike any other in history, being influenced by the way each campaign is portraying the job numbers. ....[T]hat 2.6 million job deficit since Bush's inauguration has fallen to 900,000 through August and sets the stage for a possible reversal next month. The first step toward having that happen will be September's job market. ... The second step is the yearly correction in the job-creation numbers, known as "benchmarking." The numbers now on the books are estimates, based on the Department of Labor's monthly survey of thousands of employers. After a year, however, Labor officials have hard data on the number of people applying for unemployment benefits in each state, and the employment figures are adjusted accordingly....

A look at past revisions reveals a pattern -- the survey of businesses tends to overcount jobs created during a recession and undercount them during a recovery. .... If the real recovery in employment began in the summer of 2003, as it now seems, then history would suggest that a revision upward is likely on October 8. And there is another reason that some economists who look closely at these numbers are expecting a big increase. So far, compensation for workers has grown healthily, while workers' average wages aren't rising as much. That would suggest that there are more workers out there than have been counted so far. Jared Bernstein, a former deputy chief economist with the Labor Department, said that if compensation is rising and wages are not, it could augur a sizable boost on October 8 in the estimate of the number of jobs.....

There is yet another reason to expect a revision upward in the job numbers. The most widely cited number for job creation is based on what's called a "payroll" survey of businesses. But another survey by the Labor Department estimates job creation by polling 60,000 households. Most economists consider the household survey less accurate, and it isn't cited nearly as often, but it has gained some adherents in the Bush administration because it suggests that the number of people working has increased under Bush. Economists have been debating for decades about the advantages and shortcomings of the two surveys, but the gap has grown recently between the two estimates. In fact, it has never been wider.

So, how big could the upward revision be on October 8? The average yearly revision since 1979 has been 257,000, and the average of all upward revisions is 308,000. In 2000, there was a positive revision of 468,000.

What this means is that a decent September for job creation, added to an average-sized revision for a recovery, could wipe out half or two-thirds of the remaining 900,000 deficit in jobs under Bush. It is conceivable that almost all of the deficit could disappear next month.

Will an upward revision happen? And, if it does, as a helpful e-mailer points out, we can expect the Paul Krugmans and Michael Moores to start shouting "fraud!" and "manipulation!"

I'm on the edge of several of my seats!

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