The reason is that the movement of the unemployment rate in the second quarter(March to June) of every Presidential election but one(1956) has predicted the winner of the Presidential race. If the unemployment rate falls during this period, the incumbent party holds the White House. If it stays the same, the incumbent party loses narrowly. If it rises, the incumbent party loses in a landslide.
Year change in unemployment in second quarter incumbent party win/loss %
2008 +.4% -7%
2004 -.2% +3%
2000 0 0
1996 -.2% +8%
1992 +.4% -6%
1988 -.3% +7%
1984 -.6% +19%
1980 +1.3% -9%
1976 0 -2%
1972 -.1% +23%
1968 0 -1%
1964 -.2% +23%
1960 0 -1%
1956 +.1 +16%
1952 +.1 -12%
1948 -.4% +4%
This test has worked in 15 out of 16 elections or 94% of the time.
I try to look for correlation... and with some of the extreme results something more than the change of unemployment was going on. 1952 and 1956 have the same level of change in unemployment yet wildly-different results for the incumbent Party... -12% and +16%. There is something else going on. Rake out those wins and losses of more than 10%, the ones in which something other than economic news trumps reality, and the number goes from 15 of 16 to 11 of 11. Eisenhower could have won in 1956 and LBJ could have won in 1964 if unemployment had in fact increased.
Rapid increases in unemployment would seem
prima facie to indicate incompetence in managing the economy, with management of the economy as one of the primary concerns of the electorate. Falling unemployment may indicate that people are getting jobs, but it could also indicate that people are giving up. Rising unemployment can indicate mass loss of jobs, but it can also indicate people who have been out of the workforce seeking jobs.
1980 was arguably the roughest one on the list. At the very time when millions of young adults were entering the workforce, the government was trying to slow inflation through contractionary measures. Ouch! By 1984 those had their effect -- at the price of falling real wages. But that said, at least restaurant meals were cheap because we had millions of talented people doing menial work and doing it well even if they hated their lives.
2012 will be vastly different from 1984 in that there is no obvious new industry capable of sopping up millions of workers at substandard wages as the fast-food business could. Even the fast-food business could shrink! Sure, it is possible to create jobs, but only if the total remuneration is held steady or is allowed to shrink. In essence, one person's gained job depends upon others getting commensurate pay and benefit cuts. Working people could do better to keep as many people out of the workforce as possible -- perhaps by taking in Grandma from the Home for the Senile and Incontinent and letting unemployed family members get room, board, and an allowance while Social Security remains in the family. Of course if that happens enough times then the Home for the Senile and Incontinent might have to lay off people, increasing unemployment in the process.
People may be recognizing that these are the hardest times since the 1930s -- with a similar cause. More relevant may be the period 1930-1940. It could be that the paid workforce must shrink, lest wages become a travesty.
