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Tags: Obama | Re-Election | Chances | growth

Economists: Dismal Growth Data Threatens Obama’s Re-election Chances

Thursday, 30 August 2012 08:02 AM EDT

Tepid economic-growth rates will threaten President Barack Obama's re-election chances this November, economists say.

Economic indicators have either disappointed or have pointed to a sluggish recovery, especially second-quarter gross domestic product growth figures, which the Commerce Department recently revised upward to 1.7 percent from 1.5 percent.

Growth is still not strong enough to absorb unemployed and underemployed workers stuck on the sidelines. Economists aren't expecting growth rates to shoot past 2 percent later this year.

Editor's Note: Obama Donor Banned This Video But You Can Watch it Here

"The economy was sluggish in the second quarter and the slight upward revision ... does nothing to change that picture," said John Ryding, an economist at RDQ Economics, in a note to clients, the Christian Science Monitor reported.

The unemployment rate stood at 8.3 percent in July and won't likely improve much throughout the remainder of the year either.

The government reported Thursday that more Americans than forecast filed applications for unemployment benefits last week, a sign that progress in the labor market is faltering amid a slowing economy.

Jobless claims were little changed at 374,000 in the week ended Aug. 25, matching the upwardly revised figure from the prior week, the Labor Department reported in Washington. The median forecast of 50 economists surveyed by Bloomberg News called for 370,000. The four-week moving average, a less volatile measure, climbed to a six-week high.

Companies will probably remain concerned about the possibility that taxes will rise and government spending will be cut unless lawmakers act by January. The debt crisis in the 17-member euro area and a slowdown in China may also prompt employers to keep payrolls lean, Bloomberg News reported.

Meanwhile, the upward revision to the second quarter's gross domestic product did stem from increases in consumer spending, which drives 70 percent of total U.S. economic output, though not enough to push the economy further down the road to recovery.

"We are already two months through the third quarter and more up-to-date figures show that the economy is still struggling," said Paul Dales, senior U.S. economist at Capital Economics, the Monitor added.

Other economists point out that the improvement to gross domestic product is not enough to thwart the Federal Reserve from stimulating the economy.

The Fed has said that unless the country shows marked improvement, it may intervene and jolt the economy, most likely through another round of quantitative easing, a policy tool that sees the U.S. central bank buying assets like Treasury holdings or mortgage-backed securities from banks with freshly printed money, pumping the economy full of liquidity to spur recovery.

Side effects to such accommodative policies often include a weaker dollar and rising stock prices.

"I don't think this really changes the dovish sentiment of the Fed," said Michael Hanson, a senior economist at Bank of America Merrill Lynch in New York, according to Reuters

"They are going to look at this and say 1.7 percent is below trend, that's not where we want to be and the risks going forward are still material."

Editor's Note: Obama Donor Banned This Video But You Can Watch it Here

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Thursday, 30 August 2012 08:02 AM
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