At first glance, it looked like the elections might be a slam-dunk for Republicans this year, given the way presidents in recent history have fared in the face of poorly performing economies. But as the GOP is finding out, today's economy is a double-edged sword that is cutting both for and against President Obama.
Just as the Great Recession from December 2007 to June 2009 was a once-in-decades economic event, the aftermath looks like it may produce an outlier election for an incumbent president who took office at the height of the economic crisis and has tried to nurse the economy back to health with mixed and disappointing results.
The recovery, as Republican presidential candidate Mitt Romney notes repeatedly, has been frustratingly slow, with the level of employment about halfway toward what it was before the recession. Some sectors, notably housing, may not recover fully for years or decades. Other sectors, such as the auto industry, are doing well but have been downsized permanently.
The stock market is not far from making up all the ground it lost. The Dow Jones industrial average ended last week more than 700 points shy of its all-time high of 14,156. But gasoline prices also have come close to broaching record highs over $4 a gallon in recent summer driving seasons.
Political candidates and strategists who have been befuddled by the mixed performance of the economy are not alone. Economists and political scientists who have made their careers trying to accurately forecast presidential election outcomes based on the economic performance also are all over the map this year. A few point to indicators such as an unemployment rate stubbornly higher than 8 percent throughout Mr. Obama's presidency and are predicting a victory for Mr. Romney. Others see a decisive re-election for Mr. Obama based on the improving economic environment in key swing states such as Virginia and Ohio.
Signs point both ways
Some of the favorite indicators used to forecast elections are pointing in diametrically opposite directions. The stock market, for example, has a good history of foreshadowing the victor of the presidential race. Its double-digit annual gains throughout Mr. Obama's term and solid performance this year are pointing to his re-election. Various futures markets that enable investors to bet on the outcome of the election also have moved overwhelmingly in favor of the Democrat in recent weeks.
"The market increasingly reflects a status quo election," with Mr. Obama winning re-election and Congress remaining divided between a Republican-led House and Democratic majority in the Senate, said Jeff Kleintop, chief market strategist at LPL Financial.
But another popular election gauge hailed as foolproof by some pundits -- the Conference Board's Consumer Confidence Index -- favors Mr. Romney. It is hovering far below the 95 level that was the dividing line between incumbent winners and losers in past elections. The index shot up to 70.1 percent in September, but has been in recession territory for most of Mr. Obama's term.
"Since its inception in 1967, [the confidence index] has been a perfect predictor of presidential incumbent election performance," said Ben Steil, a fellow at the Council on Foreign Relations and a confidence index enthusiast. He said the gauge has been reliable because it closely tracks the ups and downs of the job market.
