Schoen: High Unemployment, Low Growth a ‘Real Problem’ for Obama

Monday, 16 Apr 2012 04:41 PM

By Forrest Jones and Kathleen Walter

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Unemployment rates will stay high through the November presidential elections, and March's particularly weak jobs report will like mean economic growth for the second quarter of this year was weak, which will hurt President Barack Obama's re-election chances, says political analyst and Democratic pollster Doug Schoen.

The Bureau of Labor Statistics recently reported the economy added a net 120,000 jobs in March, far below most expectations, roiling global markets for days.

The March headline unemployment rate, meanwhile, stood at 8.2 percent, well above 4.4 percent reported in March of 2007.



"It suggests that the recovery has been very tenuous, that the unemployment rate is likely to stay stubbornly high through the election and that the kind of economic growth in the second quarter, which is one of the best predictors of success or failure in a presidential race, is going to be relatively low and I think auguring a very, very close race in the fall," Schoen tells Newsmax.TV in an exclusive interview.

Consumer confidence has been jumpy all year and showing more recent signs of waning as households brace for higher fuel prices.

The Thomson Reuters/University of Michigan's consumer sentiment index fell in April from March, and considering that consumer spending accounts for over 70 percent of total U.S. output, nervous households with tight purse strings might not bode well for President Obama.

"I think if consumer confidence goes down, if job creation goes down and economic growth either stabilizes or goes down, it's going to be a real problem for the White House," Schoen says.

"It's an insoluble problem, but candidly, it makes it a very much more difficult proposition than if economic growth is over 3 percent and unemployment comes down to about 7 percent."

Talk the Federal Reserve may pump up the economy injecting it with liquidity to steer the country away from deflationary decline and more towards investment and hiring remains ongoing.

Such policies, known technically as quantitative easing but dubbed by critics as printing money out of thin air, are often used as stimulus measures when cuts to benchmark interest rates don't work.

They can also pump inflationary pressures down the road.

Since the downturn, the Federal Reserve has bought over $2.3 trillion in assets from banks via two rounds of quantitative easing, known widely as QE1 and QE2.

Expect QE3, Schoen says, as it would boost stock markets and make the president look good.

"I think they are going to try and stimulate the economy, because what we have seen with QE1 and QE2 is the only way we get real movement in the markets is when that stimulus comes."

While the Federal Reserve can help the president, high gasoline prices can hurt him.

"He's in trouble any time gas goes over and stays over $4 a gallon for the vast majority of the people in the country, not just those on the east or the west coasts but through the heartland as well, and if it gets over $5 this summer, watch out."

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