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Don’t let new jobs report choose the next president

From an editorial Tuesday on Bloomberg View:

Would you want a random-number generator to decide the next president? Ludicrous as it sounds, something like that could occur Nov. 2, when the government releases its monthly jobs report.

The employment report, released at 8:30 a.m. on the first Friday of most months, offers one of the earliest indicators of the state of the U.S. economy. As such, it tends to have a big impact. The change in nonfarm payrolls and the unemployment rate have become front-page news in a nation searching for signs of recovery from the worst slump in a generation. A surprise of even 50,000 jobs can move markets.

This week’s report on the October jobs picture could be particularly consequential. It comes four days ahead of a closely contested presidential election in which job creation has been a central issue. A big payroll number, or another drop in unemployment, could tip the outcome in favor of President Barack Obama. A poor report could be just what Republican candidate Mitt Romney needs.

It’s bizarre that the jobs numbers can wield so much influence, given that they often bear little relation to what’s actually happening in the economy. The fact is, it’s just plain difficult to measure in real time how many jobs the economy has produced in a month. When the Bureau of Labor Statistics estimates the change in nonfarm payrolls, for example, it is trying to pin down a tiny shift – a matter of thousands of jobs – in a labor pool of more than 130 million people. Even with a sample of about 141,000 employers, that’s a daunting task.

Revisions to the jobs numbers demonstrate how misleading the preliminary data and the conclusions people draw from them can be. In the first eight months of 2008, for example, employment reports showed small declines of about 20,000 to 60,000 jobs a month, suggesting the developing financial crisis would be mild. The stock market held up, and economists raised their growth forecasts for the year. Now, revised numbers show that the economy began shedding about 200,000 jobs a month beginning in April 2008, a decline that would have pointed to the deep recession the country was entering.

What to do? Recognize the preliminary jobs numbers for what they are: an early guess.

Our advice: Vote for the candidate who you think can help repair the economy. Don’t let one month of fallible data change your mind.

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