The political significance of unemployment rates in the 9 percent range just 15 months before a presidential election is pretty obvious; indeed, no post-World War II president has faced this bleak a jobs picture at this juncture.Ouch.
Other measures marking the breadth and depth of the jobs problem also merit close attention, however. The alternative “U-6” unemployment rate includes people working part-time but seeking full-time work and those who have given up seeking employment. This U-6 rate has been running between 15.7 percent and 16.2 percent since March; it was 16.1 percent in July. To measure the depth of the jobless problem, look at the number of people unemployed for 27 weeks or longer; in July it was 6.2 million, and 44.4 percent of those folks have been out of a job for six months or longer.
Although the unemployment numbers are closely watched and widely recognized, the two sets of data that have the best predictive value for elections both came out in late August. The quarterly gross domestic product numbers showed that the economy grew at a rate of just 1.0 percent for the second quarter; in addition, the first-quarter rate was revised down to just 0.4 percent. Keeping in mind that the traditional definition of a recession is two consecutive quarters of negative GDP growth, the average of 0.7 percent growth for the first two quarters of this year means that we are a mere eight-tenths of a point above the recession level for the first half of this year. (Economists have a more technical definition and a special committee that determines when recessions actually begin and end.)
The well-regarded Wall Street research firm ISI Group pointed out in late August, “Since 1970, in six of the seven times real GDP [year over year] has slipped below +2.0 percent, a recession has been signaled,” a situation known as stall speed. Whether we technically end up in a recession is a distinction without much of a difference for a president seeking reelection ...
RTWT at the link above.
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