Slow economy forecast for fall election

It's likely to be a bumpy ride for the US economy between now and Election Day.

With only three months to go before the Nov. 4 contest, many economists expect a dreary backdrop at the ballot box: a rising unemployment rate, falling home prices, and stressed consumer bank accounts.

There could be some bright spots as well: US business continuing to sell goods abroad and some energy-producing areas of the nation experiencing minibooms. But on the whole, the economic news is expected to be gloomy.

"It looks like we will have a mild recession but a long recession," says David Wyss, chief economist for Standard & Poor's in New York.

One of the latest signs came Friday when the Department of Labor reported that the July unemployment rate rose to 5.7 percent, up from 5.5 percent in June. The economy lost 51,000 jobs, the seventh month in a row for job losses. By Election Day, some experts predict, the jobless rate will be 6 percent.

"Layoffs are going to continue as we go into a gradual downturn," says Mr. Wyss.

If the economy continues to fade, this could be the first election during a recession since 1980, when Republican Ronald Reagan defeated a sitting Democrat, President Jimmy Carter.

The economy and double-digit inflation weren't the only challenges facing Mr. Carter. That race was also marked by long gasoline lines and the hostage crisis in Tehran. But the economy is usually a key indicator of which party will take the White House, economists and political scientists note. That could present a major hurdle to the Republicans' presumed nominee, John McCain.

"There's an absolute and direct correlation between the economy and the outcome of elections," says Stephen Hess, a senior fellow at the Brookings Institution in Washington. "Just look at the gross domestic product – one simple data point – and whether it's up or down: If it's down and we're in a recessionary period, it is a rare exception for the out-party to lose."

But this campaign is already unusual, say Mr. Hess and other political analysts. The first African-American candidate, Barack Obama, is squaring off against Senator McCain, who paints himself as a maverick. While McCain regularly states he's proud to be a member of the GOP, he has also worked to distance himself from President Bush.

That's one reason national polls show a tight race, analysts say. The other is the fact that Obama is the first black presidential candidate of a major party.

"This is an election that's really all about Barack Obama," says Hess. "If it wasn't Barack Obama, this would be a landslide for the Democrats."

Economically, some of the hardest-hit states are also key battlegrounds. The National Employment Law Project (NELP) finds 12 states with unemployment rates already over 6 percent.

"A lot of the job loss is in the Midwest," says Christine Owens, national director of NELP. "The economy is their No. 1 issue."

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