Pethokoukis

Will the next president be the ‘recovery president’? The party that wins 2012 might win 2016, too

Barack Obama and Mitt Romney

Romney Photo Credit: Austen Hufford (Flickr)
Obama Photo Credit: Neon Tommy (Flickr)

Add this to the reasons as to why 2012 is an especially high-stake elections: The guy taking the oath of office next January might have four decent economic years, at least by New Normal expectations. The party that wins the presidency in 2012 might just win it in 2016, too.

IHS Global Insight:

The economy is still moving forward at a slow pace, facing headwinds from weak exports and business caution in capital spending. But the ground is being prepared for faster growth, making the November 6 election a good one to win. Credit conditions are gradually easing, and household demand for the traditional drivers of recovery—vehicles and houses—is gaining momentum. If we can remove some of the uncertainty that is holding growth back—over the Eurozone crisis, Chinese growth momentum, and domestic fiscal policy—growth will accelerate. In our baseline forecast, we assume that uncertainty clears only gradually. In particular, we assume that the process of getting to an agreed budget deficit package is long, drawn-out, and messy. As a result, the growth acceleration is not visible in calendar-year figures until 2014. But over the term of the next president (first-quarter 2013 to first-quarter 2017), we anticipate 9.75 million jobs being added (roughly 200,000 per month), and the unemployment rate dropping to 6.0%.

The consultancy expects GDP to grow 1.9% in 2013, 2.8% in 2014, and 3.3% in 2015. Its unemployment forecast is 7.7% in 2013, 7.3% in 2014, and 6.7% in 2015.

1. Now, obviously this assumes no catastrophic eurocrisis or a debt crisis here at home or anything else pushing us back into recession.

2. At 200,000 jobs a month, the jobs gap — the number of jobs that the US economy needs to create in order to return to pre-recession employment levels while also absorbing the people who enter the labor force each month — wouldn’t close until 2021.

3. Again, no years of 4%+ hypergrowth to close the growth gap.

4. But would Americans look at such results as slow, steady progress or as stagnation? Certainly incomes wouldn’t be rising very fast. I think today’s results might give a good hint. Will voters accept the Obama “slow and steady” argument or the Romney “this isn’t working” argument?

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