Today’s jobs report from the Bureau of Labor Statistics is full of encouraging news. Payrolls added 114,000 jobs, and unemployed fell to 7.8 percent. Unlike last month’s improvement in the unemployment rate, this month’s decline was due to more job seekers finding work, rather than more folks giving up and dropping out of the labor market entirely. And both the July and August jobs numbers were revised upwards significantly. In the third quarter of 2012, the economy added an average of 146,000 jobs per month. That’s a significant improvement over the second quarter of 2012, when monthly jobs growth averaged just 67,000 jobs per month.
The brightening labor market picture is encouraging news to many, especially the 12 million Americans who remain unemployed. It’s also encouraging news for Democrats, who have had a gloomy few days in the wake of President Obama’s weak performance in the first presidential debate against Governor Romney earlier this week. President Obama can now say that the unemployment rate is lower than it was during his first full month in office. One of Governor Romney’s favorite talking points – that unemployment has been over 8 percent for nearly four years under President Obama’s watch – is no longer valid.
Perhaps even more importantly, the positive jobs numbers are likely to truncate the positive news cycle that the Romney campaign was enjoying in the wake of Governor Romney’s aggressive debate performance. The Romney camp was badly in need of a positive swing in coverage. Indeed, the last month has been rough for both the candidate and the campaign, as a dull convention, repeated gaffes from the candidate, and reports of campaign disarray dominated the headlines. The polls in key swing states reflect deep problems for Governor Romney’s victory prospects. Yet the debate performance generated the first positive news cycle in weeks, and Romney’s prospects appeared to be on the rise. InTrade, the popular prediction market, showed Governor Romney’s likelihood of victory up by 29 percent in the morning following the debate. Today’s positive jobs numbers may shift the news cycle considerably, with attention quickly moving away from the debate and towards the bright signs for the economy. Trading on InTrade this morning hints at the implications of this move, as the Obama rally following the strong jobs report is substantially bigger than the debate-induced slump. (It’s worth noting that President Obama’s chances of victory have remained significantly above Governor Romney’s throughout the last few months; even after the debate, Obama was favored over Romney 65-35.)
More bad news for Governor Romney: the scholarly consensus is that debates just don’t matter much for election outcomes. Economic fundamentals do, and what matters most is that the economy is moving in the right direction. An improving economic landscape is good news for an incumbent. Unfortunately for President Obama, research suggests that voters’ impressions of the economic trajectory are essentially locked-in by April of the election year. This means that today’s positive jobs report is unlikely to be the knock-out blow that delivers Obama another four years in the White House. But it’s likely to reorient the media – and the messaging – of the campaign. Given the mood in the wake of the debate, that’s not a bad thing for Team Obama.