Next Week's Election Numbers Today?

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Will Democrats capture the House? And, if so, by how much? Polls on congressional races tend to be a bit spotty. To attack the question from a different angle, I checked in with Tom Brunell, a political science professor at the University of Texas–Dallas. He, along with fellow poli-sci Prof. Patrick Brandt, has constructed an economic forecasting model that attempts to predict the outcome of the battle for the House. The three main factors are the presidential approval rating, inflation, and the unemployment rate. (I first mentioned the model in my U.S. News cover story that examined the Bush economy and the midterms.) A month or so ago, the duo was predicting the GOP would barely hold the House with 220 seats. Brunell didn't want to update the model–"predicting an election on the eve of an election is like betting on a horse race with one furlong left," he wrote me in an E-mail–but I finally pressured him into it. Using the latest available numbers (Bush's rating is down, but the economic numbers are better), the Brandt-Brunell model now predicts ... the GOP will win 219 seats. But given the 6.5-seat margin of error, "it really is a coin flip right now for majority control of the House. It is anybody's ballgame," Brunell adds. So Dems may win, but no tidal wave.

Exciting bonus economic coverage: Will today's productivity numbers spook the Fed? This morning's Labor Department report showed that nonfarm U.S. productivity slowed to zero in the third quarter. And its year-over-year growth rate fell to 1.3 percent, the lowest pace in nine years. At the same time, unit labor costs, including wages, rose 3.8 percent and are 5.3 percent higher than a year earlier. Higher wages aren't worrisome to the inflation-wary Federal Reserve if they are merely a reward for more-productive workers. But higher costs and low productivity together raise inflation worries. So these numbers, according to Global Insight economist Nigel Gault, "will make the Fed very cautious when thinking about possible rate cuts, even though actual growth is slowing."

In the longer term, however, the productivity number isn't necessarily a harbinger of economic doom. Joel Prakken, chairman of Macroeconomic Advisers, thinks the number is merely a statistical blip. "Productivity always slows when growth declines sharply as it did in the third quarter," Prakken told me this morning. "I don't think you can read a lot in today's number." In the view of his firm–it's known for its forecasting accuracy–the economy, which grew at an anemic 1.6 percent rate last quarter, is regaining strength this quarter and will sport a peppy 3.1 percent growth rate next year. Prakken also thinks that productivity growth will be around 2.6 percent. While that is not as strong as in the late 1990s, it's far stronger than it was throughout the 1970s and 1980s. Prakken's firm is also working with payroll processing firm ADP on its private-sector employment report, a friendly competitor to the payroll numbers put out by the Labor Department. Based on actual payrolls the firm processes, ADP is predicting that the economy added 128,000 net new jobs in October. The Labor Department releases its number tomorrow morning. Analysts are looking for 125,000 new jobs.