The economy is looking better to the American public and with it President Barack Obama’s re-election prospects.
Claims for jobless benefits unexpectedly dropped last week to the lowest level in almost four years, providing fresh evidence the job market is on the mend. Reports released yesterday on housing and manufacturing also beat forecasters’ expectations.
The Bloomberg Consumer Comfort Index climbed for a fourth straight week to reach the highest level in a year. Sentiment is rising even among those who have yet to benefit from the recovery, as payrolls expand and the unemployment rate drops. Jobless Americans are the most optimistic since April 2008.
“Political independents have a markedly better view of the prospects for better times than they did just a few months ago, and Obama is running much more strongly among independents than he was a few months ago,” Andrew Kohut, president of the nonpartisan Pew Research Center in Washington, said. “Reports such as those out yesterday will only reinforce this notion that things are getting better.”
Economic confidence among independents, a voter group targeted by both parties, surged to a four-year high earlier this month, the Bloomberg index showed. Sentiment among Republicans in the period ended Feb. 12 was the highest since July, while Democrats were the most optimistic since mid-December, the gauge showed.
Conference Board Index
The Conference Board today said its index of leading indicators rose 0.4 percent in January, signaling the economy will keep expending through the first half of the year.
The cost of living climbed less than forecast, another report showed today. The 0.2 percent increase in January supports the Federal Reserve’s view that inflation will be contained. That maintains leeway for the central bank to continue stimulating growth through its monetary policy.
The Standard & Poor’s 500 Index climbed 0.2 percent to 1,360.45 at 10:03 a.m. in New York, near the highest level in three years, following a 1.1 percent increase yesterday. The index has risen 8.1 percent this year.
‘On the Rebound’
“People are starting to get a sense that the economy is on the rebound,” Obama told campaign donors yesterday in Corona Del Mar, California. Obama is on a three-day West Coast trip during which he’s raising more than $8 million for his re-election bid.
Obama is seeking a second term in the November election and the Republicans vying for their party’s presidential nomination have made his handling of the economy a core issue.
A Pew poll, released yesterday, found public assessment of Obama’s economic policies are improving even as many Americans remain dissatisfied. Asked about the impact of Obama’s policies, 33 percent said they have made the economy better, 35 percent said worse and 25 percent said they had no effect so far, according to the poll of 1,000 adults conducted Feb. 8 to Feb. 12. The margin of error was plus or minus 4 percentage points.
In October, Pew found 20 percent said Obama’s policies had made the economy better, 38 percent said worse and 37 percent no effect so far.
Obama’s approval rating reached 50 percent in a CBS/New York Times poll conducted Feb. 8 to Feb 13. The president also led all four Republican presidential candidates in hypothetical general election match-ups. The poll was based on telephone interviews with 1,197 adults conducted Feb. 8 to Feb. 13. The margin of error is plus or minus 3 percentage points.
The 50 percent approval rating has been a key indicator for re-election. Incumbent presidents Gerald Ford, Jimmy Carter and George H.W. Bush were all below 50 percent in March of the years they lost their re-election bids, according to the polling organization Gallup Inc. Incumbent Presidents Richard Nixon, Ronald Reagan and Bill Clinton, who each won a second term, were above that mark in March. Obama’s immediate predecessor, George W. Bush, also re-elected, was just short of the threshold at 49 percent in March of 2004.
The positive economic news helps Obama deliver his re-election message while also giving him a weapon against his eventual Republican opponent in November.
That includes yesterday’s announcement by General Motors Co., the beneficiary of an Obama-backed 2009 government bailout, that it earned $9.19 billion last year, the largest profit in its 103-year history. The company also has regained its position as the world’s top-selling automaker.
The auto company’s earnings report came just as the focus of the presidential campaign has pivoted to the center of the U.S. auto industry in anticipation of the Michigan Republican primary Feb. 28.
The four main Republican presidential candidates have criticized the rescue of GM and Chrysler Group LLC. Former Massachusetts Governor Mitt Romney, the leading fundraiser among the Republican contenders, wrote an op-ed in the New York Times in 2008 saying that if the government bailed out U.S. automakers “you can kiss the American automotive industry goodbye.”
Obama campaign manager Jim Messina trumpeted the earnings results with a message on Twitter: “Glad we didn’t let Detroit fail as Romney suggested. Never bet against the American worker!”
Republican presidential candidate Rick Santorum scoffed at the idea that bailout package helped the auto industry.
GM and Chrysler would be “alive and equally as well, or better off, than they are now,” Santorum told about 300 people at a Detroit Economic Club luncheon yesterday. “The markets would have reacted to restructure it to be more competitive.”
In speeches, Obama frequently cites the revival of GM and Chrysler to justify his economic policies and project an optimistic view of the future.
“What’s happening in Detroit can happen in other industries,” he said Feb. 15 in Milwaukee. “That’s what we’ve got to be shooting for, is to create opportunities for hardworking Americans to get in there and start making stuff again and sending it all over the world.”
Yesterday’s positive economic news follows four consecutive months of declines in the unemployment rate, a main indicator for voters and in the political debate. The January rate of 8.3 percent was the lowest in almost three years.
Still, the possibility of a worsening of the European debt crisis remains a cloud hanging over the economy. U.S. stocks slid for two days this week amid concern over Greek debt negotiations.
Tensions with Iran over its nuclear program also raise the risk of Middle East turmoil, which would drive up oil prices.
A pickup in the recovery at the start of last year was blunted by a surge in gasoline prices, the earthquake and tsunami in Japan, the European debt crisis and market concern over U.S. political gridlock stirred by protracted talks on raising the debt limit.
“We have seen people’s expectations rise several times during the Great Recession only to be dashed,” Kohut said. “Right now it looks like a pretty good run.”