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It's (Not) the (State) Economy, Stupid!

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A couple of weeks ago I saw another story about how the economies in swing states were improving at a faster clip than the rest of the country, and this might very well be the key to President Obama's re-election prospects.  I understand the appeal of this type of argument; after all, if the public is constantly being exposed to the old refrain, "It's the economy, stupid," it may seem natural to expect that voters living in states with more rapidly improving economies would be more likely than voters who live in states with weaker economies to support incumbent party candidates.  It also makes sense that so much attention has been paid to  the unemployment rates in the states, given the overall high levels of unemployment.   However, I did some work on this a long time ago (dissertation, actually) and found that what appeared to be state-level economic effects in a pooled vote model vanished in the presence of controls for the state of the national economy.  And even though others (see Campbell and Klarner) have found significant state-level economic effects in more recent pooled models that used broad indicators such as change in income and change in economic output, I'm still skeptical that state-to-state variations in economic conditions -- especially those based on unemployment -- have much to do with presidential election outcomes.

Let's take the 2008 election as a case in point.  The first figure posted below shows the relationship between the September unemployment rate and the Republican percent of the two-party vote in the states in 2008.  As would be expected under the economic voting argument, there is a negative pattern to the data, indicating that John McCain (the incumbent party candidate) did worse in states with higher levels of unemployment.  The relationship is not particularly strong, but it is just barely statistically significant (p=.04, one-tail).   The second graph shows the relationship between the change in unemployment from January to September, and the relationship is of roughly the same magnitude. 

Although these relationships are not particularly strong, they are consistent with the state-level economic voting thesis and might be taken to indicate that my skepticism is uncalled for.  But let's take a closer look.

In the top graph, if you look in the upper left-hand corner -- low unemployment and strong support for McCain, you find a collection of mostly Republican states: Wyoming, Oklahoma, Nebraska, North and South Dakota, Utah.  In the lower right-hand corner --high unemployment and low support for McCain, you find a collection of Democratic and competitive states: Michigan, Rhode Island, California, Oregon and Nevada.  And the same pattern holds for the bottom figure.  In other words, what appears to be a relatively weak, negative relationship between unemployment and support for the incumbent party candidate, likely just reflects the coincidental overlap of unemployment and partisan tendencies.  Indeed, both relationships are spurious and disappear once you take into account the partisan predispositions (Republican share of the 2008 vote) of the states.  In fact, the partial correlation for the September unemployment rate is positive (ryx,z=.20), though not significant.

And it turns out the 2008 is not the only instance of null effects from unemployment.  The Table below provides some findings from simple regression models in which the incumbent party vote share is regressed on either the September unemployment rate or the change in the unemployment rate between January and September (separate models), along with the statewide vote share for the incumbent party candidate in the previous election.  The cell entries are the unstandardized regression coefficients for each year, along with an asterisk to indicate if the slope is significant at the .05 level.

Simply put, there is nary a shred of evidence to suggest that the unemployment outlook in the states has anything to do with state-level outcomes in presidential elections.

In fact, there are only two cases of significant effects -- both for the September unemployment rate -- and one of those is a positive coefficient, suggesting that the incumbent candidate, Jimmy Carter, benefited from higher unemployment!  While one could make a policy-oriented argument in favor of this, it seems like a bit of a stretch.  Te most obvious conclusion to draw from this table is that state-to-state variations in unemployment are not likely to have much impact on how the states vote this November.

This is not to say that unemployment doesn't have electoral repercussion.  In fact, as I showed last summer, changes in the national unemployment are closely tied to election outcomes.  Simply put, presidential elections are national elections and it is national conditions -- not state-level variation around those conditions -- that drive them. 

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