James Cooper in the October 12, 20009 issue of BusinessWeek notes that 52 economists recently surveyed by Blue Chip Economic Indicators project that real domestic product growth over the next four quarters will be about 2.7% with no single quarter topping 3%. If they are right, that’s bad news for America but good news for Republicans who are likely to take advantage of continuing economic woes to gain seats in Congress. Additionally, we got more bad news on the job front. Job cuts exceed forecasts in September and the jobless rate reached 9.8% up from 9.7% in August.
However, all may not be gloom and doom for Democrats and America. Cooper says the history of the last nine buisiness cycles points to a much stronger recovery. He notes that “like a rubber band, the economy snaps back in proportion to how far it was pulled down.” For example, after the last two severe slumps in 1973-75 and 1981-82, real GDP grew 6.2% and 7.7% respectively. Other positive news is that the index of leading economic indicators has grown at an annual rate of 11.7% since March, the fastest growth in a similar period since the 1981-1982 recession. Additionally, while actual unemployment numbers count big in elections, unemployment “expectations” seem to matter even more. In other words, even if unemployment is still over 9% next September, Democrats may not be hurt that bad in the November mid-term elections if they can change voter expectations about future unemployment. If voters feel that economic conditions are improving and that job losses have bottomed out, they may not punish Democrats as severely. We’ll likely lose some seats in Congress but the damage may just be minimal.
We’ll see.
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