It's Not the Economy, Stupid

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Pundits predicted that the slow recovery would doom the president. Why were we wrong? Maybe we ignored the power of slow incremental improvement.

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Reuters

I've written hundreds of articles about the economy in the last two years. But I think I can reduce those thousands of words to one sentence. Things got better, slowly.

Of course, there were peaks and valleys along the way. We tip-toed toward recession last summer. We flirted with a capital-R Recovery in the winter. We returned to the sad new normal in the spring. But basically: Things got better, slowly.

That's a simple observation. Maybe even simplistic. But it's meaningful. Politicos are wondering now how the president has managed to soar above the gravitational pull of the weak recovery, or orchestrate the "collapse of the economy as a political issue." But maybe the fault is in us, the prognosticators. Maybe, in a slow but even recovery, the economic numbers were never as damning as we made them out to be.

Let's consider two key economic variables: GDP and unemployment. If you go all the way back to Obama's first month in office, the president's record looks as bad as almost any incumbent in the last half century. GDP fell sharply in his first two quarters and has grown slowly since. We still have fewer total jobs than we did on the first day of his presidency. Some voters surely hold that against him. But let's assume that the vast middle is evaluating Obama on a more recent time frame to account for the fact that he inherited an economic collapse beyond his control.

Let's start at the end of 2010. In the last 20 months, GDP has grown at an annualized basis of about 1.7 percent. Average monthly job creation has been about 145,000. On a report-to-report basis, these numbers have varied tremendously. Job creation has yo-yo'd between 250,000 and 50,000 in a span of one month. GDP growth has exceeded 2 percent and crashed back to 1.

But zoom out a bit, and the getting-better-slowly process has symmetries. Last year, real GDP grew by 1.8 percent. This year, real GDP is growing by 1.65 percent. Last year we averaged about 147,000 jobs per month. This year we're adding an average of 139,000 jobs per month. Seen from 30,000 feet in the air, the recovery is almost lulling in its tepid consistency.

These are not good numbers. But according to some economic models, they are good enough. In June this year, Nate Silver named 150,000 jobs the bright line Obama should hope to pass to cinch re-election. Following that prediction, job creation slowed -- just as it did last summer. But the 1.5-year trend is still holding fast to ~145,000. In the last four months of 2011, the economy added 173,000 new jobs per month. 

And that 1.65 percent GDP figure? That's not very good. But it's not damning, either.

Political scientists at George Washington, Yale and UCLA built a model using election-year GDP and approval rating to predict an incumbent's chances of winning re-election. Ezra Klein made an interactive with it. Even with 40% approval rating, GDP growth of 1% would be enough to predict a slim re-election. Meanwhile, Obama's approval rating is in the mid-to-high 40s. That gives him three-in-four odds to win re-election with GDP growth at 1.6%.

"The new normal is the old dismal," Ed Gillespie, the former chairman of the Republican National Committee, told National Journal. "If you believe that 1.5 percent economic growth rates and chronic unemployment around 8 percent and flat wages are our lot in life and that's acceptable, if that mentality takes root and is acceptable to a majority of Americans, President Obama could get reelected."

Gillespie is wrong if he thinks that this sort of growth predicts a loss for a popular incumbent. In fact, it predicts a narrow victory -- even for an incumbent with far less approval.

But he is right that the new normal is the old dismal. This is a crummy economy. And it's nothing to be satisfied with. Our unemployment crisis is tragic. Personal income growth is pathetic. But perhaps the reason the economy has faded as an indicator of doom for the president is that the overall pace of its recovery has been thermostatically mediocre and only-just-barely acceptable to only-just-barely enough voters. As the models predict: Things getting better, slowly puts us in a mood of frustration ... but not quite a mood of change. 

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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