Hardest hit: Reuters’ reporters, who must now abandon the use of all forms of the word “unexpected.” Their latest survey of economists shows an expectation of lower growth than first predicted in the final two quarters of this year — and even lower growth in 2011:
Stubbornly high unemployment and signs of persistent weakness in the housing market have prompted economists to further cut their outlook for U.S. growth in the second half of the year, a Reuters poll showed on Wednesday.
The September poll marked the third consecutive month economists had scaled back expectations for gross domestic product in the second half, and followed the U.S. government’s announcement on Friday that unemployment ticked up to 9.6 percent in August. …
Overall, GDP is forecast to average 2.7 percent in 2010, down from 2.9 percent in the August poll and 3 percent in the July poll. The median of forecasts in the most recent poll was for average GDP growth of 2.4 percent in 2011, down from an August forecast of 2.7 percent and a July forecast of 2.8 percent.
Democrats hoping for good news in the week before the midterms better scale back their hopes significantly. The survey’s estimation for 2010Q3 GDP, the initial estimate of which Commerce will announce four days before the election, has shrunk to just 1.8%, barely above Q2’s revised estimate of 1.6%. Needless to say, that number will do nothing to boost the reputation of Democrats as stewards of the American economy, nor will it mean any new job growth in the foreseeable future.
The same is true for 2011, and the political risks worse. A growth rate of only 2.4% for the year will mean high unemployment rates throughout the year, as it will take sustained growth above the 4% level to start replacing the lost jobs from 2008-9. If unemployment rates remain above 8% or higher coming into the presidential primary season, Obama will have a lot of difficulty convincing his party to stifle a primary challenge, let alone convincing voters in a general election to give him a second term.
And if Democrats thought this midterm election season was tough, the survivors of this election will see an even angrier and more motivated electorate in 2012 if the economy does nothing but stagnate for the next eighteen months. Even if a recovery starts gaining steam in the first quarter of 2012 — a mighty big if under current policies — voters probably won’t notice its effects until months later. Just ask George H. W. Bush how that 1992Q1 recovery worked out for his re-election campaign.