By Matt McDonald, (202) 822-1205, mmcdonald@hamiltonps.com

There is one year left until Election Day 2012. On November 6, 2012 the American people will decide who will be president for the next four years. And on the Friday prior to that, November 2, 2012, they will hear the final verdict on job creation during President Obama’s four years in office.

We do not yet know what that jobs verdict will look like, but we can look at trends. In 2011 so far, the economy has created jobs at a rate of about 120,000 per month according to the BLS employer survey (the household survey indicates a more modest rate). If this trend were to continue through to Election Day, the unemployment rate would be 9.1 percent, exactly the rate that it stands at today, and in line with current estimates by both private and public sector economists.

The reason we would be making no progress on unemployment, despite new jobs each month, is because we would consistently be creating fewer jobs than we need just to keep up with new people entering the workforce. This is the true measure of success on jobs – creating more than we need to keep pace. Numbers below that level are an economic failure even if they “beat expectations.”

Wall Street coverage of jobs day is biased towards these expectations – “did we beat or miss expectations?” The reason for this bias is that traders and banks want to know whether the assumptions in their models need to move up or move down. For them, it’s important to know whether the number is higher or lower than the one already in their economic model. But that distinction is important to trading, not to the economy at large.

For the economy and those without jobs, the important question is whether we are creating more jobs than people entering the workforce – around 140,000 per month, based on CBO estimates. In this context, last month’s “positive surprise” of 100,000 new jobs is actually a bad number, because it’s just another month with fewer new jobs than there are new people hoping to fill them.

To actually improve the unemployment rate, we need to be significantly above where we are today on job creation. To get below 8 percent unemployment by Election Day, the economy needs to create 263,000 jobs per month. To reach a more modest 8.5 percent, the economy needs to create 203,000 jobs per month. Just to get below 9 percent, we need to be creating 143,000 jobs per month on a consistent basis.

We can see a similar bias in the reaction to third quarter GDP growth.ᅠ Initial estimates of GDP growth for the third quarter came in at 2.5 percent, which while better than what we have seen recently, is still below what is needed to bring unemployment down. Based on Okun’s Law, the rule of thumb relationship between the change in GDP and the change in unemployment, we need growth to be above 3 percent annually to make any real progress on jobs.ᅠ Again, while 2.5 percent growth was a pleasant surprise for third quarter growth, it is simply not enough to create the jobs that we need.

It is easy to lose perspective and cheer the monthly creation of 100,000 jobs or GDP growth back at 2.5 percent, but while in a comparative sense these are good numbers, in an absolute sense these numbers are still bad. It is a sign of just how weak the economic recovery has been that we are cheering mediocrity and trying to forecast whether or not unemployment can crack the 9 percent floor before next November’s election.

After tomorrow, there will be 12 months left for the President to figure out if we can make real economic progress or if he will be forced into playing an expectations game with bad data.

Matt McDonald is a partner at Hamilton Place Strategies and a veteran of two Presidential campaigns and the White House.ᅠ Prior to joining HPS, Matt worked for McKinsey and Company. ᅠHe holds an MBA from MIT’s Sloan School of Management and a degree in economics from Dartmouth College.