STOCK MARKET WATCH -- Friday, 12 October 2012

[Demeter]

9. Why Isn’t the Sluggish Economy Helping Romney?

THE ECONOMY CAN'T GET A WORD IN EDGEWISE DURING THIS CAMPAIGN, IMO

http://www.newyorker.com/online/blogs/johncassidy/2012/09/why-isnt-the-sluggish-economy-helping-romney.html

Another day in the campaign, another piece of bad economic news—several of them, actually—and another set of polling experts saying that Obama is heading for victory. It all raises anew the biggest question of Election 2012: Why isn’t the sluggish economy helping Romney more?

Let’s start with the polling experts: Larry Sabato and his colleagues at the University of Virginia’s Center for Politics. In their latest update on the state of the race, they moved five tossup states—Iowa, Ohio, Nevada, Virginia, and Wisconsin—into the Obama column, pushing him over the two hundred and seventy votes in the electoral college that he needs for victory. With the debates still to come, Sabato et al. stopped short of calling the election for the President, but they said, “Obviously, Romney needs to turn some of the blue on this map to red, or this race will be over.”

Now the poor economic news: before the markets opened this morning, the Commerce Department revised down its estimate of second-quarter growth in G.D.P. from 1.7 per cent—already a pretty low number—to 1.3 per cent. The drought in the Midwest, and its impact on crop production, accounted for much of the change, but still. The 1.3 per cent figure is an annualized one. The actual growth in G.D.P. during the quarter was about 0.3 per cent, which means economic growth virtually ceased...This picture of an economy expanding at a rate well below its capacity to grow remains unaltered by the one piece of unequivocally good news that emerged today: according to the Labor Department, over the past eighteen months the economy has created quite a few more jobs than was first thought. A couple of days ago, in a not-entirely-optimistic look at how Romney could turn things around, I pointed to the annual revision of the jobs figures as something that could play in his favor—if the numbers were revised down. Instead, they were revised up. According to the latest tally from the Labor Department, which is based on state employment-tax records rather than a monthly sampling of businesses, between April, 2011, and March, 2012, the non-farm economy created 386,000 more jobs than had been previously reported. The Obama campaign will seize upon this revision as evidence that the employment picture is considerably better than was previously thought, and I don’t blame them. In the twelve months to March of this year, the economy created about 2.3 million jobs, rather than the 1.9 million that had been previously reported. That’s a significant difference, and but for sixty-seven thousand government jobs that were eliminated, it would have been even bigger. During the period in question, the economy created, on average, about 194,000 jobs a month, which is a pretty good figure—if not overly impressive compared to previous recoveries.

Yet, I doubt this accounts for Romney’s problems... I think there are a couple of economic factors playing against Romney and in favor of Obama. One is the stock market, which has risen by more than more than twenty-five per cent in the past year and is now approaching the highs it reached before the financial crisis of 2007. Another, notwithstanding today’s news on pending home sales, is the recovery in house prices, which has now spread well beyond rich coastal cities like San Francisco and New York. According to the S&P/Case-Shiller house-price index, house prices in Detroit, Phoenix, and Minneapolis are up 19.7 per cent, 17.0 per cent, and 16.5 per cent, respectively, compared to their lows. I’ve made this point before, but moves of this magnitude have to be affecting how voters are feeling about their personal situations. Add in the fact that gas prices are still a good bit lower than they were earlier this year, and the fact is that for Americans who aren’t out of work, or working part-time because they can’t find full-time jobs, the situation has improved substantially over the past year...That’s got to be hurting Romney and his effort to make the economy an issue, but so, surely, is his own personal history and incompetence....AND TAXES...MORE