It’s beyond conventional wisdom that the economy is far-and-away the most important issue in this year’s election. The economy is not nearly as strong as Obama would like, and he’s praying that there’s no more to the summer swoon, and that the jobs report that comes out on Friday, November 2 (four days before the election) isn’t a total dud.
There are all kinds of models that purport to predict what varying economic indicators mean for a Presidential election, though they all suffer from very small sample sizes.
So we’re going to take a look at what the economy was like the last time an incumbent President didn’t win re-election, which happened to be George H.W. Bush in 1992.
The chart below shows the Bush economy in a nutshell.
We’re only looking at 3 indicators here: Gas prices (green line), the unemployment rate (red line), and the S&P 500 (blue line), since really, those are the kinds of numbers that really relate to how people feel day in and day out. For simplicity, we’re starting the charts right at the beginning of 1989.
As you can see, the stock market (blue) did fantastically under Bush, gaining nearly 60% in 4 years.
Gas prices in green spiked during the Gulf war/recession (particularly brutal), but by the end of the administration were back on the decline.
What really stands out as having gone the wrong way for Bush was the unemployment rate, which was climbing well into 1992. The recession was technically short, and markets boomed, but the unemployment rate was a killer in November.
Here’s the same chart, but with University of Michigan Consumer Confidence added in Orange. As you can see, it never got back to the level it was at the start of his administration.
So with that frame of reference, let’s look at what the situation is like for Obama.
As with H.W. Bush, the stock market has done fantastically under Obama. Gas prices are much higher than at the state of the administration. And unemployment while way too high, has generally been trending down for most of the time Obama has been in office.
This is why the next few jobs reports are simply going to be enormous. If the downtrend in the unemployment rate is re-established, that will be huge. If it’s clear that things are stalling out/getting worse again, it seems likely that the same datapoint which knifed the first Bush president, will also get Obama.
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