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Another Recession?


If you hear some scurrying, it may well be an economist quickly revising downward his forecast of economic growth for the just-completed second quarter of 2012. A steady stream of worrisome data has been coming out in recent weeks. The Conference Board reported that consumer confidence declined for the fourth month in a row. The closely watched measurement of consumer sentiment taken by Thomson/Reuters and the University of Michigan recently showed consumers to be the most pessimistic they’ve been all year.

Although consumer confidence is technically an economic marker, it also has great political utility. Optimistic consumers (read voters) are more likely to stick with the status quo; pessimistic ones are more likely to vote for change.

The big shocker, however, came on July 16 when the retail-sales numbers were released. These sales dropped for the third month in a row, and the April numbers were revised downward. Even when the data crunchers removed the volatile sectors of autos and gasoline from the equation, the numbers still fell. For economists, these were jaw-dropping figures. Similar numbers often precede recessions.

With the presidential election less than four months away, the state of the economy is obviously important. Some analysts place great stock in certain economic indicators; others say that the economy’s direction is more important than any one or two numbers. They all agree that lousy and dropping economic statistics heading into an election are really, really bad for the incumbent.

In the surveys conducted by Blue Chip Economic Indicators of 50 top economists earlier this year, projections for growth in the gross domestic product for the second quarter hovered between 2.1 percent and 2.3 percent. The survey conducted in early June revised the number down to 1.8 percent. The 10 most pessimistic projections averaged a growth rate of just 1.3 percent; the 10 most optimistic averaged 2.4 percent. The next Blue Chip survey will not be conducted until early August, but some of the participating economists are already lowering their second-quarter numbers. At least one, RBS, dropped its already pessimistic projection from 1.5 percent to 1 percent. Although U.S. manufacturing is starting to look a little better and the housing sector is beginning to grow again, the rest of the picture looks bleak and is getting worse. That obviously isn’t good for a president, regardless of when the downturn started and whose fault it initially was.

But this is a very close race, and in close races lots of things matter. As of July 18, President Obama held a scant lead of 1.6 percentage points over Mitt Romney in the Huffington Post’s Pollster.com average of polls, 46.6 percent to 45 percent; RealClearPolitics.com’s average was 1.3 percentage points, 46.5 percent to 45.2 percent. The Gallup Organization’s three-week moving average of 9,032 registered voters, June 25-July 15, similarly showed Obama ahead by 2 points, 47 percent to 45 percent. Most of the surveys are of registered voters, and we know that as the election draws closer, more pollsters convert their sampling to likely voters, benefiting Republicans, who tend to move up several points.

Contrary to the allegations of many conservatives who e-mailed me complaining about columnists who use poll numbers from registered voters early on rather than those few polls that use likely voters throughout, most pollsters are uncomfortable with the latter sample early on because people tend to be poor predictors of whether they’ll show up. Mark Blumenthal, a former Democratic pollster who runs Pollster.com, has an interesting article on his site now about this dichotomy of registered-versus-likely voters and when it is the best time for pollsters to convert. He demonstrates that a shift does indeed occur and that it favors Republicans.

The other complaint is that national numbers do not show what is going on in swing states, which is true. The picture in the nine to 12 swing states at the beginning of a race looks little different from the national outlook; the difference of course is that the voters in (or near) swing states are smothered in saturation advertising, while the rest of the country watches from a distance. Thus differences can develop, and the polling in swing states tends to show a wider lead for Obama than the aggregate national numbers. Very likely, Obama’s lead is the result of his campaign’s attacks on Romney and on the Republican’s business record at Bain Capital, which resulted in layoffs and outsourcing, as well as his investments abroad.

In my last two Off to the Races columns for National Journal Daily, I wrote in some detail about criticisms of the Romney advertising strategy, that in the almost 50,000 ads he has aired since Rick Santorum dropped out of the GOP nomination race, plus the ads run during the nomination campaign, Romney had yet to run a single positive, biographical spot defining who he is. As a result, the Bain attacks in swing states were sticking to him like Velcro. Those criticisms still seem valid, but with a worsening economy, what happens next is anyone’s guess.

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