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The U.S. presidential election has finally entered high gear with President Obama and Republican Mitt Romney laying out competing visions for the economy in their first debate held in Denver. But while this high-stakes debate was short of political fireworks the September job figures unleashed a torrent of commentary in cyberspace. Data released Friday showed that the U.S. unemployment rate unexpectedly fell in September to its lowest level since January 2009. That prompted Jack Welch, the former chief executive officer of General Electric to weigh into the debate tweeting “Unbelievable jobs numbers‚Ķthese Chicago guys will do anything. Can’t debate so change numbers.”

The Labor Department statistics showed the unemployment rate slipping to 7.8% with employers adding a seasonally adjusted 114,000 jobs in September. While the numbers don’t necessarily indicate acceleration in the labor market, they do suggest that the spring slowdown in hiring may have been short lived. The economy has become a central theme in the political narrative and with just a month to go before the election, the stakes for both parties could not have been higher.

This report was decidedly good news for President Obama since it was the lowest unemployment reading since he took office and one of the last major gauges of the economy to be released prior to the November 6 th election. While most voters don’t make their decisions based on the unemployment rate, a rising unemployment rate coupled with heavy media scrutiny might have swayed undecided voters to take another look at Mitt Romney who was widely regarded as the victor in their first debate.

The non-farm payrolls numbers released Friday, showed only modest improvement from the sub-100,000 per month figures of the spring, which seems inconsistent with the dramatic improvement in the unemployment rate. While the drop in the unemployment rate is encouraging, the Bureau of Labor and Statistics (BLS) household survey is notorious for producing outliers since it is based on a smaller and more volatile survey than the main payroll figures. By including most of the country’s largest employers, the payroll data captures a much higher share of the actual employment. The likely cause for the sharp drop in the unemployment rate is either sample error in the BLS’s household survey, or the reflection of several months of progress in the job market, rather than a dramatic one-month shift.

Not included in the unemployment rate are discouraged workers, those that have stopped looking for full-time employment. The severity of the U.S. recession has displaced seven million people that because they are discouraged and not actively seeking employment they don’t figure in the published unemployment rate. But they do show up in labor participation statistics and the numbers are dismal—just 58.7% of working age Americans have jobs. The Fed will likely continue to support the stock market by keeping rates low until the jobless rate dips below a “real” 7%—some several years away.

The Street is overwhelming hoping for a win by Republican Mitt Romney, despite evidence that Democratic administrations are actually better for markets than Republican administrations. Romney’s willingness to dismantle Obamacare, his policy plank of refraining from raising top marginal tax rates—especially on dividends and capital gains—and his supply-side economic bias, all would be cheered by financial markets if Romney wins.

Birinyi Associates looked at annual returns for the S&P 500 going back as far as 1928, and then grouped them according to which party was in the White House. The result was incredibly one-sided. If you happened to invest when a Democrat occupied the top job, you would be sitting on an average annual return of 10.2%, with the market returns positive two-thirds of the time. But if you invested when a Republican occupied the White House, the average annual return was just 5.6%, or almost half the return under Democrats.

If you chose to invest in just the first year of the administration the results would be even more pronounced. For the Democrats, the first year in office sent the S&P 500 up an average of 10.3%, while for Republicans the result was a meager 0.3 percent and the market fell some 64 percent of the time.

But the past is largely anecdotal and despite the political calculus of the various campaign strategists the biggest cheerleader for markets is likely to remain the Fed. While the employment data this past week are mildly encouraging, a robust economic recovery remains elusive, suggesting that the Fed will likely keep on stimulating the economy and markets for a long time to come.

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