On the July Jobs Report, and Our 2020 Election Model

A big beat in both net payrolls and the unemployment rate. Contemporaneous labor market data implied a big miss, so data collection and methodological problems must persist. The payroll gain added 76 electoral college votes for Trump in our quantitative 2020 election prediction model, bringing his forecasted winning margin to 281. The absolute number of net payrolls in July was large by historical standards, but well below June’s gains. We think this was due to self-quarantining in the face of media-driven exaggeration of the risks of a second wave of Covid-2019. With new cases subsiding, and hospitalizations and fatalities low, the self-quarantining is ending, with the Social Distancing Index already back to its mid-June recovery lows. Claims data is showing the labor market is responding, but too late for the mid-July data collection for this jobs report.