Will the economy save Obama's job?

chart_unemployment_101104.top.jpg By Chris Isidore, senior writer


NEW YORK (CNNMoney.com) -- The economy was a Democrat's worst enemy in this year's midterm elections. Will President Obama face the same fate in 2012?

Political scientists say the direction of the economy is what colors an incumbent's re-election chances most. And even though sluggish growth is widely expected to continue next year, economists are generally forecasting better growth, and improvements in the job market in 2012. That could well be enough to save Obama's job.

What effect will the 2010 midterm election have on the economy?
  • Improve it
  • Make it worse
  • No impact

"The next two years will be more important for [Obama's] prospects than the first half of his first term," said Douglas Hibbs, a retired professor at the University of Gothenburg who has studied the impact of the economy on voter choices over the last 60 years.

Unemployment currently stands at 9.6%, just a pinch below the 10.1% peak hit last October. Economists surveyed by CNNMoney.com expect unemployment will still be barely over 9% a year from now.

But the long-term outlook is rosier -- overall, they forecast unemployment to drop to about 8.1% on Election Day 2012, with some predicting it'll drop as low as 7% by then.

That kind of improvement could lift income enough to make Obama a winner, said Hibbs. His model to predict elections focuses on average growth rates in personal income rather than political polls. It has proven very accurate in elections since 1954. And he said gains in employment would almost certainly bring about the kind of significant gain in per capita income that could help the incumbent.

"If we get into a jobs recovery, the American economy is capable of extraordinary growth rates," Hibbs said.

Obama wouldn't be the first president to ride the improving job market wave. During the 1982 recession, unemployment peaked at 10.8%. A year later it fell to 8.5%, and by Election Day 1984, it was down to 7.4%, allowing Reagan to run his now-famous "Morning in America" commercials hyping a more optimistic outlook for the economy. The aggressive campaign was a success, and Reagan was re-elected in a landslide victory.

But the economy doesn't necessarily need to be strong to get the president re-elected, according to Mark Zandi, chief economist at Moody's Analytics. It just needs to improve enough to not be considered weak.

"Right now all incumbents are being hammered by the bad economy," said Zandi. "Two years from now, if we're at 8% unemployment, it'll be moving fast enough in the right direction to not be the major issue."

But while improvement in income and employment is important, other economic issues could impact the next election -- namely voters' view of their own net worth and the value of their homes, said Mark Peterson, a professor of public policy at UCLA.

"When people perceive the whole system is doing better, if we return to a period where housing is rebounding and foreclosures are down and there's a sense of turning a corner, that's the kind of thing that Reagan was able to tap into," said Peterson.

If the true test will be in the court of public opinion, the president could be facing an uphill battle, said Greg Valliere, chief political strategist for the Potomac Research Group. While economists proclaim a "recovery," real people are still hurting. If that doesn't change before November 2012, Obama could be in trouble.

"I'm not sure you can make the case in the next two years that the public will perceive a clear recovery," said Valliere. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,827.75 12.81 0.07%
Nasdaq 4,787.32 29.07 0.61%
S&P 500 2,072.83 5.80 0.28%
Treasuries 2.23 -0.03 -1.15%
Data as of 10:03pm ET
Company Price Change % Change
Kinder Morgan Inc 42.32 0.00 0.00%
Apple Inc 119.00 0.00 0.00%
Facebook Inc 77.62 1.99 2.63%
Pfizer Inc 31.10 0.00 0.00%
Bank of America Corp... 17.11 0.00 0.00%
Data as of Nov 26

Sections

The European Parliament has voted to break up Google and weaken its dominance across the region. More

Warren called it "hypocritical" for the White House to oppose corporate inversions but nominate a person who has worked in this area. More

Two pilots encountered drones while flying over college football games and another pilot saw one while flying over the Hollywood sign. More

Natalie's Cakes and More has raised $84,000 through GoFundMe after protests trash store. More

Retailers are promising big deals this Black Friday, but are the savings actually worth the shopping mayhem? Test your deal-sniffing skills. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.