Are You Better Off Than You Were Four Years Ago?
The phrase "Are You Better Off Than You Were Four Years Ago?" and "It’s the Economy, Stupid" have become standards of American election discourse in recent decades. And seemingly for good reason. Although it is rare to unseat an incumbent, poor economic performance seems to play a role. We are less than four months away from the US Presidential election. Financial and economic developments have caused surprise political outcomes around the world from time to time. UBS took a look back at the first terms of the nine presidents that preceded President Obama to determine if the performance of economic variables had any predictive power in determining the odds of re-election for a second term. The news is not good, from GDP growth to real disposable income, and from unemployment to the Misery Index, it seems the bailer-out-in-chief may just have an uphill battle.
The data suggest that economic growth plays a role in a candidate’s ability to win a second term. Real GDP grew slower under George HW Bush than all the other nine presidents, followed by his son, followed by Ford (when comparing compound annual growth rates). Real disposable personal income was even more definitive, growing at the slowest pace under the three presidents who were unseated (George HW Bush, followed by Ford, followed by Carter). With one more quarter left to be reported before the election, under Obama’s first term as president, real GDP is running slower than any of his predecessors, expecting only George HW Bush, and real disposable personal income is the slowest of any of his predecessors since 1953, running at 1.5% and 0.7%, respectively.
Unemployment also rose over Ford’s and George HW Bush’s presidencies by more than any of the others, and ticked up some under Carter’s.
Inflation has been relatively tame under Obama, but the misery index has risen. However, the misery index rose in 6 of the last 9 presidencies.
Critically though - given our recent chart on Obama Odds vs the S&P - Financial markets are less definitive in predicting the presidential outcome. Of the three candidates that were unseated after their first term, only Ford saw a decline in the S&P over his tenure.