Closing arguments will hang on jobs report

There have been 45 monthly employment reports since Barack Obama was inaugurated president. Number 46 will be the biggest of them all.

Not in terms of significance for what it tells us about the economy; on that score, every report is about the same. They provide guidance on whether the job market is getting better or worse, and in something close to real time, but are subject to revision and statistical blips, and thus are only one piece of a complex economic puzzle.

Economics writers tend to be dismissive of analyzing jobs numbers through a political lens; ultimately, what determines elections is the overall thrust of the economy and the persuasiveness of the answers offered by competing candidates, not any one month's data. But the Labor Department's October report, due out Friday, is an exception.

Coming four days before the polls, the headlines out of this report, and their political resonance, could well be more important than whatever it actually tells us about the economy.

What it would mean

This close to Election Day, a surprisingly bad report would add potency to Republican nominee Mitt Romney's arguments that President Obama's economic policies are a failure. A surprisingly good report would give Obama and his allies evidence that the country is heading the right direction. Either way, the results will hang over their closing arguments.

Forecasters are expecting numbers that fall somewhere in between those markers, predicting data that matches the economic trend of the past three years: glacial improvement in a job markets still feeling the impact of the recession.

Looking at a broader set of data in recent weeks, there are plenty of reasons to think that the October jobs numbers will disappoint. Hiring tends to go hand-in-hand with business investment more generally, and the latest numbers on orders for nondefense capital goods excluding aircraft point to stagnation in that sector. The number was unchanged in September and has fallen in four of the oast seven months. With the fiscal cliff looming -- a series of tax increases and spending cuts that will take effect Jan. 1 absent a deal between Congress and the president to avert them -- businesses may resist adding workers until they get clarity. Already, hiring of temporary employees has dried up.

Economic releases fit forecast

And the sharp improvement visible in the survey of households in the September jobs numbers may turn out to be a overly positive statistical aberration. An additional 872,000 people reported having a job in September's household survey, which does not square with the amount of hiring that employers reported. It wouldn't take much to drive the unemployment rate up back to the symbolically important 8 percent threshold.

That said, the recent precedent does not point to that sort of "reversion to the mean" after a steep decline in unemployment. The last three times that the unemployment rate has fallen 0.3 percentage points or more in a single month, as it did in September, it dropped again the following month.

Thursday's round of economic releases fit with these forecasts of weak economic growth. Payroll processing company ADP estimated that employers added 158,000 jobs, based on hiring and firing by its clients. (ADP also introduced a new methodology, which has had an uneven track record.)