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Defying the Odds

Defying the Odds
New book about the 2016 election.

Thursday, June 2, 2011

Economic News and the Election

The Conference Board said continued weakness in the economy will probably keep the jobless rate at a lofty 8.5% at the end of 2012, down only slightly from 9% currently. The level of unemployed Americans peaked at 10.1% in October 2009 following the recession.

Obama enjoyed a solid 57% approval rating in May, according to an NBC poll, boosted by foreign-policy successes such as the killing of Osama bin Laden. A weak economy, however, could still complicate his re-election chances. The two-year-old recovery from the devastating financial crisis of 2008 and 2009 has been painfully slow, and recent signs point to more weakness.

A moribund housing sector, soft consumer spending and the government's inability to stimulate the economy further after fighting the crisis will keep growth at a subpar level around 2.5% for the next 18 months, said Gad Levanon, economist at the Conference Board.

Job gains are expected to average a monthly 165,000 until the end of 2012, below previous recoveries and too low to make a dent in the unemployment rate. The jobless rate will also remain high as Americans who were previously discouraged by the poor labor market--and therefore weren't counted as unemployed--return to the market and are unable to find work.

The Conference Board's forecasts are more pessimistic than projections made by the Federal Reserve. The central bank predicted a month ago that the economy will expand by more than 3.0% this year and next, taking the jobless rate down to around 7.8%.

The New York Times reports:

No American president since Franklin Delano Roosevelt has won a second term in office when the unemployment rate on Election Day topped 7.2 percent.

Seventeen months before the next election, it is increasingly clear that President Obama must defy that trend to keep his job.

Roughly 9 percent of Americans who want to go to work cannot find an employer. Companies are firing fewer people, but hiring remains anemic. And the vast majority of economic forecasters, including the president’s own advisers, predict only modest progress by November 2012.