It’s an election year and pollsters are reading the tea leaves for signs of strength or weakness in the economy. American voters will enjoy four more monthly job reports before casting ballots on November 8, the first of which arrives this Friday.
Beyond our regular predictions, in the wake of this year’s Democratic and Republican national conventions in Philadelphia and Cleveland, we compared the state of the job market leading up to similar party conventions in 2012 and 2008. What can past elections tell us about how voter sentiment might be swayed by the job market this November?
But first, with a booming 287,000 new jobs added in June, what should we be watching for in Friday’s jobs report? Here are our top-line predictions:
- 160,000 new jobs added to nonfarm payrolls in July.
- Unemployment rate down to 4.8 percent.
- Average hourly wages up 2.6 percent from one year ago.
- Labor force participation rate down slightly to 62.5 percent.
How Americans perceive the health of the economy can have a huge impact on presidential elections. Strong growth and rising wages famously tend to favor the status quo. And bad economic news is often a harbinger of doom for the incumbent party. How do the economies of 2008 and 2012 compare to today’s?
We’ve Come a Long Way
Today’s labor market is in dramatically different shape from the previous two election years.
On the surface, the labor market back in June 2008 wasn’t in bad shape. There was a 5.6 percent unemployment rate, healthy 3.6 percent annual wage growth, and nearly 4 million available job openings. But what few voters realized at the time is that the economy was standing on the edge of a precipice, about to tip into the most severe recession since the Great Depression.
As the Republican and Democratic political conventions began in summer 2008, the boom and housing bubble of the early 2000s was beginning to unwind. The collapse of banking giant Lehman Brothers was well underway in June, a watershed event that sparked widespread financial panic in fall 2008.
This was accompanied by a series of disastrous monthly jobs reports. Heading into convention season, the June 2008 jobs report revealed -165,000 U.S. job losses—the beginning of a downward spiral that would shed millions of jobs in the next year until hitting rock bottom in March 2009 with -823,000 job losses in a single month.
In many ways, the 2008 election season was one of reeling uncertainty. As the respective Republican and Democratic party conventions got underway in St. Paul and Denver, they were under a dark cloud of widespread layoffs and an impending recession.
How Today’s Job Market Compares to Past Presidential Elections
|Unemployment Rate (June)||5.6||8.2||4.9|
|Monthly Job Growth (June)||-165,000||87,000||287,000|
|Job Openings (May)||3.96M||3.70M||5.50M|
|Wage Growth (June, annual rate)||3.6||1.5||2.4|
|Labor Force Participation Rate (June)||66.1||63.8||62.7|
Note: State of the labor market in each June prior to Democratic and Republican national conventions.
Source: U.S. Bureau of Labor Statistics.
Four years later, the nation’s economic picture had improved dramatically. By the time the political convention season of summer 2012 rolled around, the nation had endured the most severe recession in recent memory and was healing deep wounds from the Great Recession.
The nation’s unemployment rate in June 2012 hovered at 8.2 percent, far above today’s level but down sharply from the 10.0 percent peak of 2009. Wage growth was crawling along at a 1.5 percent annual rate, sparking a slow-wage-growth debate that continues today.
During the previous recession, the nation’s labor force participation rate had plummeted to 63.8 percent by June 2012, down from the all-time peak of 67.3 percent in 2000. In turn, this launched an epic debate during the 2012 election season about causes and solutions for the growing number of Americans throwing in the towel on the U.S. labor market.
But like new growth of a forest floor after a fire, job openings rebounded to 3.7 million by May 2012, up from a low of 2.2 million during the depths of recession. And the June 2012 jobs report showed the economy added 87,000 new jobs—slow growth but gaining traction as the housing crisis receded from memory.
The tone of labor market news was decidedly upbeat as the Republican and Democratic parties geared up for the 2012 conventions in Tampa and Charlotte. The worst of the recession was behind us. And although the recovery was weak by historical standards, the economy was on the mend as party nominees took to the stage to accept their nominations.
Returning to Good Times
Fast forward to 2016. By comparison with the past two presidential election years, today’s economy is in stunningly good shape.
As of May there were 5.5 million unfilled job openings, near an all-time high. The unemployment rate is 4.9 percent, with many cities like Austin, Nashville and Minneapolis boasting rock-bottom rates of 3 percent or below. Job growth has slowed this year, but the June jobs report revealed a roaring 287,000 new jobs created. Even wage growth has shown signs of improvement, growing at 2.5 percent annually—offering real economic gains to workers in today’s era of near-zero inflation.
While not all workers have shared in the gains from recent good times, compared to past eras we are living in time of remarkable stability and growth. More importantly, there is no obvious sign today that the end of this long expansion is near. After seven years of consistent growth, the next resident of the White House stands to inherit one of the most robust job markets in a generation.
What it Means for the Election
On a day-to-day basis, it’s hard to keep a balanced perspective on the economy. Even in good times, it’s easy to find stories of workers displaced by trade and changing technology. And during bad times, it’s easy to forget that ups and downs of the business cycle are a normal part of life.
During this election season there has been relatively little debate about jobs and the economy. However, this could change rapidly if we see any surprises—either positive or negative—during the remaining monthly jobs reports between today and November.
In general, voters tend to flock toward reform and bold plans during times of uncertainty. And good news pushes voters in favor of staying the current course. For this reason, pollsters will be watching the next few jobs reports closely as we inch toward Election Day.
To speak with Dr. Andrew Chamberlain about this month’s jobs report or labor market trends, contact pr [at] glassdoor [dot] com. For the latest economics and labor market updates, subscribe to email alerts here and follow @adchamberlain.