What do the Economic Indicators Say About Dubya's Chances?

In the article "Presidential Elections and the Economy" we examined the link between economic performance and an incumbent's chance of getting re-elected to the post of President of the United States. We saw that the unemployment rate and the growth of the economy, as measured by Real GNP growth, give us some information on the likelihood an incumbent President will be re-elected. In particular strong unemployment and growth numbers in the final two years of a Presidency are particularly important.

With the data available at the time, we compared the current Bush administration to the 2nd term of the Clinton administration:

Let's consider the performance of jobs, as measured by the unemployment rate, and the economy as measured by the growth rate of real GDP, under George W. Bush's presidency. We only have data up to and including the first three months of 2004, so we will have to use that for our comparisons. First, the growth rate of real GNP:

Real GNP Growth
Clinton's 2nd Term: 4.20%
2001: 0.5%
2002: 2.2%
2003: 3.1%
2004: 4.2% (First quarter) 37 Months Under Bush: 2.10%
Last 15 Months: 3.32%

and secondly, the average unemployment rate:

The Unemployment Rate
Clinton's 2nd Term: 4.40%
2001: 4.76%
2002: 5.78%
2003: 6.00%
2004: 5.63% (First quarter) 37 Months Under Bush: 5.51%
Last 15 Months: 5.92%

We see that both real GNP growth and the unemployment rate have been worse under the Bush administration than they were under Clinton in his second term as President. As we can see from our real GNP growth statistics, the growth rate of real GNP has been rising steadily since the recession at the beginning of decade, whereas the unemployment rate is continuing to get worse.

Have things gotten better for Bush since April of 2004? The Real <i>GDP</i>, another measure of economic growth statistics were recently released for the second quarter of 2004 and they do not look too good for the President:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.8 percent in the second quarter of 2004, according to preliminary estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 4.5 percent.

(Source: Bureau of Economic Analysis. An explanation of the difference between GDP and GNP can be found here)

Thus the economy, which had been growing at a rate of 4.5% as measure by Real GDP growth, has slowed down considerably to 2.8%. This is not good news for the President.

Unlikely the growth rate of real GNP and real GDP, the unemployment rate is measured monthly, not quarterly. Also unlike the growth rate of GDP, the unemployment rate has improved slightly during the last few months:

The Unemployment Rate
Jan 2004: 5.6%
Feb 2004: 5.6%
Mar 2004: 5.7%
Apr 2004: 5.6%
May 2004: 5.6%
Jun 2004: 5.6%
Jul 2004: 5.5%
Aug 2004: 5.4%

What does this all mean for the President? On the surface it appears to be bad news as the economy appears to be slowing while the unemployment rate is only improving slightly.

The betting public does not seem to agree with this analysis.

Recall that in "Presidential Elections and the Economy" we saw that "as of May 7, 2004, Internet trading site Tradesports.com gives George W. Bush a 60% chance of winning the upcoming election". Things have improved for Bush according to the gamblers, as of September 16, 2004, the site gives him over a 69% chance of winning the election.

Is the electorate more positive about the economic numbers than I am, or is the election going to be the one that isn't decided by the economy? I'd love to hear your thoughts; please contact me by using the feedback form.