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COMMENTARY

Job numbers best election indicator? Try the stock market

November 08, 2012|By James Rainey
  • A trader seen on the floor of the New York Stock Exchange.
A trader seen on the floor of the New York Stock Exchange. (Justin Lane / European Pressphoto…)

Election analysts fixated for months on the lack of progress on job creation — with unemployment stuck near 8% — as a principal reason to believe President Obama’s reelection prospects looked bleak.

But a group of researchers said Thursday that the pundits would have been wiser to watch another economic indicator: the stock market.

In the three years running up to Tuesday’s election, stocks gained 34.8%, said researchers writing for the Gainesville, Ga.-based Socionomics Institute. They said that in the three years before an election, a large stock market gain — they called it a positive “move” — is “highly likely to be associated with a landslide victory for the incumbent.”

PHOTOS: Reactions to Obama's victory

It would be hard to characterize Obama’s 2-point victory over challenger Mitt Romney as a landslide, but a paper describing market and electoral trends said the nation’s mood tends to closely track the markets, even for voters who don’t own stocks.

The academics said they studied elections back to George Washington’s victory in 1792 to reach their conclusion that stock movements aren’t just a better predictor than the unemployment rate but also a better indicator than gross domestic product or inflation.

“GDP is rendered insignificant when combined with the stock market, and unemployment and inflation had no predictive value in any of our tests,” said Deepak Goel of the Socionomics Institute.

Goel and his fellow academics released their paper — “Social Mood, Stock Market Performance and U.S. Presidential Elections: A Socionomic Perspective on Voting Results” — in January of this year. Given Obama’s victory, they sent out a news release Thursday to remind people of their work.

ANALYSIS: The Times breaks down election day

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james.rainey@latimes.com

Twitter: @latimesrainey

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