Financial news seesaw roils election campaign
The famous line from Bill Clinton’s 1992 campaign — “It’s the economy, stupid!” — held true for most elections befor Clinton’s, and it’s likely true for this year’s campaign two decades later.
The problem, both for candidates and for political observers attempting to predict how the economy will affect Campaign 2012, is that it appears our economy is stuck in a mediocre holding pattern. For every step forward there is another backward, and it rarely seems there is indisputable evidence of recovery or relapse.
Consider some of the economic news of the past few days:
✔ Housing prices in this country’s largest metro markets rose 5.9 percent from July 2011 to July 2012, according to the Standard & Poor’s/Case-Shiller 20-city index. That’s the largest one-year increase since 2005.
Part of that price rise is due to decreasing inventories of foreclosed homes, which depress prices. But experts also say consumers are growing more confident about getting back into the real estate market, especially since interest rates are remaining low. These factors may make many voters feel more positive about the incumbent in the White House as the election approaches.
✔ New figures released by the Bureau of Labor Statistics Wednesday revised upward by 386,000 the number of jobs created from April 2011 to March 2012. That means there was a net increase in jobs created from February 2009 to March 2012, giving President Barack Obama more ammunition for his claim that his policies are working and the economy is slowly recovering.
Countering those arguments, and giving Republican Mitt Romney additional campaign weapons, are news items such as these:
✔ On Wednesday, the U.S. Commerce Department announced it had revised downward its estimate of economic growth in the second quarter of this year from 1.7 percent to 1.3 percent. Economists say a growth rate of around 3 percent is required to create enough jobs for all new workers entering the job market.
✔ Even worse, the Commerce Department reported Thursday that sales of durable goods — everything from appliances to automobiles to aircraft — dropped 13.2 percent in August.
That’s the worst drop since January 2009, and it spells trouble for near-future manufacturing activity and factory employment. It also suggests the third-quarter numbers for economic activity will be as anemic as the second quarter and the unemployment rate is unlikely to drop much from where it has hovered at just over 8 percent.
The economy may indeed be the primary issue that determines the outcome of this year’s presidential election. But the jury’s still out on which candidate will benefit most from the seesawing economic news.