Replies

My personal view is that whichever of the two standards is a closer reflection of empirical economic reality will be the one that will better reflect what will happen for the upcoming election. Quite frankly, I don't personally know what to make of the household survey (yes, I'm aware of all the arguments involving the two reports) but I lean toward the payrolls report simply because President Bush's poll standings and perceptions of the economy suggest to me that it is the better reflection of the economic landscape.

That being said, if it is true that the household survey is the more representative and applicable of the two, then I think this will become quite clear by the time Election Day rolls around.

One other minor point, I am not predicting a Bush loss in November even if it appears that way from my remarks. In fact, my current projection has the Electoral College tied at 269-269 if the election proves closely competitive, and so I would assume the Republican House would put Bush back in office. Moreover, I have many more states that I think likely to move from Kerry toward Bush than from Bush toward Kerry from that current baseline.

A lot can and will happen. At the present time, neither a 40 state Bush victory nor a 35 state Kerry victory would especially surprise me (though the latter more so).

I agree, the two reports are curious. But I find the lack of objective comparisons of the two reports much more telling. I tend to think ground truth is closer to the lower number (household) than the higher (payrolls). Why? Two reasons, both anecdotal (there's that word again!):
1) Consumer spending has been boosting the economy for a few years now. I have trouble believing it could remain that strong given an economy where 2.x million jobs really went away without being replaced. (Yes, I'm aware of the tax cut impacts, the refinancing boom, and America's fascination with overextending their credit.) Even with all that, I still find it curious.
2) The "virtual" work environment makes it much easier for folks to work from home, going into business for themselves. Things that would understandably be missed on a payroll report.

One other point which is a bit more "concrete" than the previous two - Wall Street knows much more about all this than I do. Yet the market has skyrocketed over the past year, even though job creation acc to Payrolls has been lagging. I realize profits is a big driver of the market, but overall economic factors are paid close attention to. I think the big players would be much more cautious with their investments were the economic factors reflecting a negative outlook or current environment.

Just my two cents (which was worth only 1.2 cents a year ago...)