Friday, January 13, 2012

In elections, jobless trend matters more than rate


AP Economics Writer

WASHINGTON— Unemployment is higher than it's been going into any election year since World War II. But history shows that won't necessarily stop President Barack Obama from reclaiming the White House. In a presidential election year, the unemployment trend can be more important to an incumbent's chances than the unemployment rate.

Going back to 1956 no incumbent president has lost when unemployment fell over the two years leading up to the election. And none has won when it rose.

The picture is similar in the 12 months before presidential elections: Only one of nine incumbent presidents (Gerald Ford in 1976) lost when unemployment fell over that year, and only one (Dwight Eisenhower in 1956) was re-elected when it rose.

Those precedents bode well for Obama. Unemployment was 9.8 percent in November 2010, two years before voters decide whether Obama gets to stay in the White House. It was down to 8.7 percent in November 2011, a year before the vote. It fell to 8.5 percent in December and is expected to fall further by Election Day.

Even so, the unemployment rate is still at recession levels. And former Massachusetts Gov. Mitt Romney has made the weak economy the centerpiece of his campaign.

But unemployment has now dropped four months in a row. And the economy added 1.6 million jobs in 2011, the most since 2006.

Of course, unemployment isn't everything. Obama's prospects could be changed by the strengths or weaknesses of whoever emerges as his Republican opponent or by a triumph or setback in foreign policy, perhaps in Afghanistan or the Middle East.

And there's no guarantee that unemployment will continue to slide through Election Day.

Americans who have given up looking for work don't count as unemployed in the official tally. But if they get more optimistic, they might re-enter the job market and join the ranks of the officially unemployed, pushing the rate back up, says Republican strategist Rich Galen.

Galen says what matters is how the economy looks in late summer when undecided voters start making up their minds.

"What people perceive in August is what they take to the polls with them."

Three dozen economists surveyed by The Associated Press in December see an 18 percent chance that Europe's debt crisis will cause the U.S. economy to slip back into recession. If 2012 brings a recession, Obama would surely lose, writes Yale University's Ray Fair, who feeds economic forecasts into a computer model to predict elections.

Still, the online betting market Intrade on Friday put the chances of an Obama victory in November at 52.5 percent.

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