Historically, there has been no relationship at all between the unemployment rate on Election Day and the incumbent’s performance. However, there has been a relationship between the change in the unemployment rate in the months leading up to the election and how well the incumbent does. The decline in unemployment under Mr. Obama this year since December is the largest in an election year since Ronald Reagan’s re-election bid, when it declined to 7.3 percent in Sept. 1984 from 8.3 percent in Dec. 1983.
But he cautions that a "drop in unemployment alone is no guarantee of re-election — there was also a considerable drop in unemployment in 1976, and Gerald Ford lost." Felix Salmon watches Intrade:
[W]ithin the first half-hour of the debate on Wednesday, Obama’s InTrade odds fell from 71% to 67%, just on the back of his weak performance. And then, this morning, they spiked right back up again, from 65% to 71%.