Why falling unemployment may cause problems for Trump

NEW YORK: The unemployment rate in the United States fell to 7.9% in September, from 8.4% in August, a sharp drop which in normal times would be good news for a president seeking re-election in a little over a month.

These are not normal times. As the best-known summary labor market statistic, the U.S. unemployment rate is a “psychologically important number” for voters, said Michael Brown, senior U.S. economist at Visa.

But President Donald Trump’s announcement on Friday that he had tested positive for the novel coronavirus pushes that number into the background: Voters may be ‘weighing virus-related news a bit more than economic data right now. moment,” Brown said.

The drop in the unemployment rate in September, reported Friday by the Labor Department, extends a strong downward trend from the 14.7% recorded in April, which was the highest level since the Great Depression.

But other details in the report don’t fit easily into Trump’s narrative of an economy coming back to life.

Monthly job gains slowed. Overall, of the 22 million jobs lost since February, the economy has recovered about half.

“Getting the other half back is going to be a lot harder,” said Michael Arone, chief investment strategist at State Street Global Advisers.

Notably, about 865,000 women left the labor force last month, according to the data, about four times the number of men. Latinas accounted for more than a third of that decline, according to the report.

These populations are critical to Trump’s re-election hopes as well as those of Democratic presidential nominee Joe Biden.

The mass exit of women from their jobs coincided with the start of the school year in the United States, with many children learning online and at home.

“These numbers are really what parents have been screaming for months, but in the form of economic data,” said Michael Madowitz, an economist at the left-leaning Center for American Progress. “I can’t imagine that’s going to help win over voters.”

Friday’s report counted more than 12 million Americans among the unemployed, a demographic group less likely to turn out at the polls than employed workers, according to consistent studies.

But in today’s environment, there’s a twist: voter turnout among the unemployed tends to rise when overall unemployment is high.

Amber Wichowsky, a professor of political science at Marquette University in Wisconsin, has studied thousands of state and local elections and found that higher unemployment is associated with higher turnout, and that Republican incumbents “are more likely (than Democrats) to be punished by bad unemployment numbers.”

In the Nov. 3 election, she said, it may well be different: The public health crisis could suppress voting if people fear voting in person.

Moreover, it is difficult to find a clear trend linking unemployment rates to presidential turnout, or the outcome.

The unemployment rate was almost as high as it is today when voters chose Jimmy Carter, a Democrat, over Republican President Gerald Ford in 1976, when Carter lost to Republican challenger Ronald Reagan in 1980, and when Governor Arkansas Democrat Bill Clinton ousted Republican President George. HW Bush in 1992.

It was also nearly as high when Americans re-elected Democratic President Barack Obama in 2012.

High-frequency data tracked by Reuters shows shift work across various industries rose last week and was approaching 95% of levels at the start of the year. Retail traffic estimates based on cellphone data rose above their March 1 level, before a state of emergency was declared, according to information from Safegraph.

Consumer sentiment in September jumped sharply, although a final reading of the University of Michigan’s monthly survey on Friday suggested the gains were led by Democrats, with only small improvements among independents and Republicans. .

The number of Americans filing new claims for unemployment benefits fell for the week ended September 26 but remained high, the government reported Thursday, and personal income fell in August, underscoring the importance of another government bailout that economists say is needed to keep the recovery from faltering further.

At the start of this week, the number of new cases of COVID-19 had increased for two consecutive weeks in 27 of the 50 US states. The evolution of the virus, Federal Reserve officials and others have repeatedly said, is paramount to the economic outlook.

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