On the April Jobs Report, and Our 2020 Election Model

This morning’s jobs report was a slight upside surprise versus consensus, as was the unemployment rate. The low-wage leisure sector was again the hardest hit, perversely raising average hourly earnings. This moves our presidential election model from strongly favoring Trump to favoring his Democratic rival, presumably Biden. But the model was not calibrated for shocks like this, and this is more an “emergency” than a recession, so the effects on voter sentiment are hard to predict. In the Covid-2019 crisis, Trump’s approval has risen to the highest in his presidency, while Biden’s has crashed. As the virus crisis recedes in importance, the election – and whether Trump’s pro-growth pro-business policies will be continued, especially the low corporate tax rate – will be a major factor for asset markets.