Analysis: Easing economy will offer some respite to Obama

Reuters News
|
Posted: Jul 06, 2011 3:34 PM
Analysis: Easing economy will offer some respite to Obama

By Patricia Zengerle

WASHINGTON (Reuters) - Signs of economic improvement could bolster President Barack Obama's re-election hopes as he tries to beat back Republican attacks over his failure to create enough jobs.

Economists say things are looking brighter in the second half of 2011, which would augur well for Obama as he gears up a 2012 campaign that will largely hinge on how Americans feel about the economy.

Manufacturing is improving, a housing price decline may be abating and -- crucially for U.S. consumers -- gasoline prices are down sharply from their highs in May, which should help overcome disappointing unemployment data -- the most politically sensitive economic statistic.

"After weeks of general gloom on the economic front, a little sun shone through the clouds this week," economist Andrew Tilton of Goldman Sachs wrote in a note to clients.

Economists polled by Reuters expected the jobless data released Friday to show the U.S. rate held at 9.1 percent in June, unchanged from a disappointing report for May.

Although polls give the Democratic president the edge over his Republican challengers, Obama's approval rating is just below 50 percent and Americans are looking for answers about how the country will move forward.

"While the president's accomplishments are important and demonstrate that he is a strong leader, voters care most about what candidates have to say about the future," said Bill Burton, a former White House aide who now heads a Democratic fundraising group.

A strengthening recovery would provide a big boost to Obama as he makes the case that he deserves to be re-elected, with the economy the issue most likely to affect whether voters feel optimistic when they head to the polls in November 2012.

"All the projections suggest that things will be slightly better in a year," said Ipsos pollster Cliff Young. "That's all good for him because how the economy's going has a fairly big impact on how people think about things."

Republicans vying for the nomination, particularly early front-runner Mitt Romney, a former governor and wealthy businessman, have been connecting with some voters by pounding the Democratic president over the sputtering economy.

"It's the pocketbook issues," said Tim Hagle, a political scientist at the University of Iowa, whose early caucuses will play a big part in selecting the Republican presidential nominees. "They're saying, 'Look, how is this affecting me?' That's the potential problem that Obama in particular faces."

WHAT'S THE MAGIC JOBLESS RATE?

But experts discounted what has become the conventional wisdom that Obama will be in trouble because no U.S. president has been re-elected since World War Two if unemployment has been higher than 7.2 percent on Election Day.

The sample is too small, given the overall advantage held by any White House incumbent, and other issues like Obama's personal popularity and positive ratings on issues including national security and foreign policy.

"If the unemployment rate were 7.5 percent, he'll get re-elected hands down," said Jim Kessler, vice president for policy at Third Way, a centrist Democratic think tank.

"The question is what if it's 8.2 percent, what happens then? People know he inherited this economy, they're not fools. It's whether they feel like we're making progress and we're going to continue to make progress," Kessler said.

With Republicans and Democrats blaming each other for stalled negotiations about raising the U.S. debt ceiling, both parties have been working to win the rhetorical fight over which can best handle the economy.

A Republican advertisement launched Wednesday listed the country's economic problems, including the high unemployment rate, $14 trillion in national debt and housing foreclosures, and urged voters to "change direction" and oppose Obama.

"Don't let Obama drive us to disaster," said the ad, which features a car making left turns.

The Democrats hit back by repeating their themes that Republicans want to preserve tax loopholes for oil companies and tax breaks for millionaires and billionaires.

The White House also heavily promoted what it called the "Twitter Town Hall," in which Obama responded to a selection from thousands and thousands of questions on jobs and the economy submitted in Twitter's 140-character format.

(Editing by Alistair Bell and Doina Chiacu)