Economic studies show that it is not so much the level of unemployment but the rate of change or improvement in the months prior to the election that influences voters.
“The point is really are we getting better, or are we getting worse, and how fast is it changing. Whether the unemployment rate is 6 percent or 9 percent matters less,” said Christopher Wlezien, a political science professor at Temple University and co-author of a soon-to-be-published book, “The Timeline of Presidential Elections.”
He noted that there was not much difference in the level of unemployment when President Carter lost his re-election bid in 1980 with a 7.5 percent unemployment rate and President Reagan won re-election four years later with a 7.2 percent rate. The difference between the two elections was unemployment was climbing rapidly under Mr. Carter, but falling quickly under Reagan, he said.
The unemployment rate plunged 1.3 percentage points in the year leading up to Reagan’s landslide re-election. While unemployment has fallen quickly since August, it has not dropped as far as it did under Reagan, so whether the decline continues in the months ahead could be critical for Mr. Obama’s re-election, Mr. Wlezien said.
The history of elections shows that the economy’s performance “matters more and more as time goes by” in the months building up to the election, he said.
Whether the economy will keep up its recent spurt of growth is a matter of strenuous debate among economists. Many worry about a repeat of last year, when the economy started the year on a robust note but quickly faded under the weight of fast-rising gasoline prices and a devastating earthquake in Japan that held back growth in manufacturing for months.
Gas prices appear to be making another run at records of more than $4 a gallon as they did last year, this time in response to rising tensions in the Middle East. Economists say a repeat of last year’s high gas prices would hold back growth, but would be unlikely to entirely derail the economic recovery or snuff out growth in the job market.
A war in the Middle East sparked by Iran’s nuclear ambitions, on the other hand, might spike gas prices as high as $5 a gallon and be fatal to the recovery, according to Standard & Poor’s economists.
One threat to the economy — the long-running European debt crisis — has subsided substantially in recent months. Global financial markets have calmed in response to efforts by the European Central Bank to flood struggling European banks with more than $1 trillion in cash since December.
That has enabled the U.S. stock market to avoid the wild gyrations seen last year in response to the European crisis and stage a recovery.
Moreover, Greece’s success at getting its creditors to accept a 50 percent cut in bond payments last week, avoiding an uncontrolled default on its debt, removes a ticking time bomb that many analysts feared could go off and blow up the global economy and markets.
“Fortunately, for President Obama, he can now scratch the euro area off the list of potential pre-election risks,” said Jacob Funk Kirkegaard, an analyst at the Peterson Institute for International Economics.
“No large European bank is going to go bust” before the November election as long as the European Central Bank keeps the money spigots open, he said. Although Europe’s economy has gone back into recession, the “euro area stagnation is unlikely to materially affect the U.S. economy and hence the election campaign,” he said.
Mr. Kirkegaard noted that Greece’s settlement with bondholders Friday, while officially labeled a default by Wall Street ratings agencies because it was coerced, turned out to be a “nonevent” in the markets.
“October surprises can always pop up and suddenly change the course of elections,” he said. “But if an unforeseen event upends President Obama’s re-election quest, the origin is not likely to have been in Europe.”
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