Obama’s Anchor

The political significance of unemployment rates in the 9 percent range just 15 months before a presidential election is pretty obvious; indeed, no post-World War II president has faced this bleak a jobs picture at this juncture.

Other measures marking the breadth and depth of the jobs problem also merit close attention, however. The alternative "U-6" unemployment rate includes people working part-time but seeking full-time work and those who have given up seeking employment. This U-6 rate has been running between 15.7 percent and 16.2 percent since March; it was 16.1 percent in July. To measure the depth of the jobless problem, look at the number of people unemployed for 27 weeks or longer; in July it was 6.2 million, and 44.4 percent of those folks have been out of a job for six months or longer.

Although the unemployment numbers are closely watched and widely recognized, the two sets of data that have the best predictive value for elections both came out in late August. The quarterly gross domestic product numbers showed that the economy grew at a rate of just 1.0 percent for the second quarter; in addition, the first-quarter rate was revised down to just 0.4 percent. Keeping in mind that the traditional definition of a recession is two consecutive quarters of negative GDP growth, the average of 0.7 percent growth for the first two quarters of this year means that we are a mere eight-tenths of a point above the recession level for the first half of this year. (Economists have a more technical definition and a special committee that determines when recessions actually begin and end.)

The well-regarded Wall Street research firm ISI Group pointed out in late August, "Since 1970, in six of the seven times real GDP [year over year] has slipped below +2.0 percent, a recession has been signaled," a situation known as stall speed. Whether we technically end up in a recession is a distinction without much of a difference for a president seeking reelection. The Blue Chip Economic Indicators survey of top economists in early August showed projections of economic growth of just 1.8 percent for calendar year 2011 and 2.5 percent for 2012. GDP growth is expected to rise to only 2.8 percent for the third quarter of 2012 and 2.9 percent for the fourth quarter; the report projected unemployment just barely dipping to 8.7 percent in the third quarter of next year and to 8.5 percent in the fourth quarter. Given the slow GDP growth, even that modest improvement in the jobless rate may be overly optimistic unless even more people stopped looking for work.

A more esoteric economic measure, but one that many political scientists and economists have found to be the most reliable economic statistic for predicting elections, is real personal disposable income-specifically, changes in that number from the same month the previous year. On Aug. 29, the Commerce Department reported that personal incomes, after inflation and personal-income taxes, increased by just 1.2 percent in July from last year, marking a pretty steady erosion since October, when real PDI grew at 3.8 percent from the year before. That postrecession peak was followed by 3.6 percent growth in November, 3.2 percent in December, 2.8 percent in January, 2.7 percent in February, 2.4 percent in March, 1.8 percent April, 1.3 percent in May, and 1.4 percent in June, before July's 1.2 percent. Plotted on a graph, since October the real PDI change from a year earlier looks steeper than any black-diamond ski slope. (For real junkies, the Federal Reserve Bank of St. Louis offers the FRED Economic Data website, chock-full of numbers and a program to plot your own graphs.)

The economic data buttress the view that this presidential election is the GOP's to lose, although if Republicans nominate a candidate who has difficulty connecting with the independent voters between the two ideological and partisan 40-yard lines-that is, the voters who ultimately decide elections-they may well test that proposition.

This economic downturn obviously began before President Obama took office, and its severity is rooted in the financial crisis of 2008 and in Bush administration policies. But over four years, presidents come to own the economy and, fairly or not, are expected to take responsibility for it. The challenge that the Obama reelection campaign faces is to figure out how to either shift that responsibility to the GOP or make the case that the alternative might be even worse. It's obviously not the situation that any political contender wants to be in, yet that is where Obama is.