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Slow economy forecast for fall election

Citing dreary job numbers, some economists see the first 'recession election' since 1980.

(Page 2 of 2)



Ohio's unemployment rate already tops 6 percent. Michigan's is 8.5 percent, the highest in the country.

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Recent polls show Obama ahead in Ohio, although by only two percentage points, less than the margin of error. In Michigan, polls also show a tossup.

While a recent building boom has kept the construction trades busy around Detroit in the past year or two, Michigan has been hard hit by the foreclosure crisis as well as by woes in the auto industry.

"I would like to think we're going to learn our lesson and go back to the Democratic Party," says Ed Coffey, business representative of the Michigan Building and Trades Council in Detroit. "I guess my dad was right: If you want to live like a Republican, vote like a Democrat."

Mr. Coffey was originally a strong supporter of Sen. Hillary Rodham Clinton primarily because of the Clinton administration's economic record. He's now on the Obama bandwagon, but he admits some union households that have voted Republican in the past may be attracted to McCain.

"If they're of a persuasion that they can't see their way clear to vote for an African-American, I think McCain would be more palatable to them than George Bush," he says. "But it's going to be close."

McCain also has support in sectors of the economy that are doing well, such as commercial construction. While residential construction lost about 5,200 jobs in July, the commercial and industrial construction sector gained 4,100 jobs, according to Friday's employment report.

"Our industry is still very vibrant," says Gerry Fritz, spokesman for the Associated Builders and Contractors, which represents commercial and industrial contractors. "On the issues that are important to our industry, McCain came back with a great score."

Part of the problem for the national economy is an issue of timing. Currently, consumers are still spending some of the $100 billion in rebates sent out this spring. By Election Day, however, that money is likely to be gone.

"There is not another check in the mail," says Dan Meckstroth, chief economist at Manufacturers Alliance/MAPI in Arlington, Va. "Consumer spending levels have to come down."

The growth of consumer income has been crucial in past elections, says Larry Bartels, a Princeton University economist and author of "Unequal Democracy: The Political Economy of the New Gilded Age," a book published by The Russell Sage Foundation, which supports research in the social sciences.

"The tipping point for a party in power for eight years is around 2 percent real growth in income around the election," says Mr. Bartels. "Most of the forecasts are for somewhat less."

In fact, economists say income growth this year might be negative. The average annual wage growth is slightly more than 3 percent, but the headline inflation rate is closer to 5 percent. This would indicate the average worker has lost about 2 percent in real terms on income.

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