Economic indicators that best correlate with presidential election results

This was printed in the Boulder Daily Camera on February 25, 2012.

Which economic indicators best correlate with presidential election results?  Last year New York Times statistician Nate Silver presented an elegant answer to this question.  For the sixteen presidential elections since World War II, he computed the correlation between the incumbent party’s margin of victory and the value of 43 indicators in the first nine months of the election year. The results? Change in employment rates matter. Market indexes and oil prices don’t.

The Institute of Supply Management’s manufacturing index best correlates with incumbent party victories, with a 46 percent correlation. Close behind are changes in non-farm payrolls and changes in the unemployment rate – both above 40 percent correlation.  Since World War II, incumbent presidents ran for reelection seven times. Only Jimmy Carter and George H.W. Bush lost – both when the unemployment rate increased.

Note that the change in unemployment rates matter, not the rate itself, which had zero correlation.  Meanwhile, gain of the Dow Jones index had only a six percent correlation. Silver also found a 15 percent correlation between lower gas prices and an incumbent victory.

While the unemployment rate has been decreasing for about a year, it’s not necessarily a good sign for Obama.  The rate has decreased partly because many have stopped looking for work. Classifying these people as unemployed would increase the unemployment rate by 1.25 percentage points, reports the Congressional Budget Office.  Worse for Obama, economist James Sherk shows that despite job growth, this is the “weakest recovery in more than half a century.”

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3 Comments

Filed under economics, politics, published

3 responses to “Economic indicators that best correlate with presidential election results

  1. Rock

    Figures lie and liars figure. As long as the numbers that are reported are manipulated by special interests to represent an predetermined opinion, opponents won’t believe them and advocates won’t believe anything else. The artfulness of the propaganda or the lack thereof will have as much if not more influence in the outcome….JMHO

  2. Stephen Bailey

    I’m glad you mentioned the cooking of the unemployment statistic. Someone should do the research using the labor force participation rate which is much more difficult for the government to manipulate. And, the research should use John Williams’ shadow government statistics unemployment rate as he continues to calculate it the same as it was in 1980. A standard by which something is measured by is relevant only if the standard is sound and not shifting. If the standard for measuring foot size shrinks 30%, that doesn’t mean your foot grew 30%!

  3. Mike

    I note that platform, belief in collectivism vs individual freedom, corruption and other factors appear not to have an effect. Do American voters vote based on how they feel at the moment?

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