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Brett Arends' ROI
April 29, 2011, 12:34 p.m. EDT
By Brett Arends, MarketWatch
BOSTON (MarketWatch) "” When President Ford ran for re-election in 1976, the unemployment rate was 7.7%. He lost.
When Jimmy Carter ran in 1980, the rate was 7.5%. He lost.
In his first post-meeting press conference, Federal Reserve Chairman Ben Bernanke says the centra; bank trimmed its 2011 growth outlook following a slower-than-expected first quarter.
And when George H.W. Bush ran in 1992, it was 7.3%. He lost, too. As Clinton strategist James Carville said, "It's the economy, stupid."
Now take a look at the Federal Reserve's latest unemployment forecasts, unveiled on Wednesday by chairman Ben Bernanke.
By the fourth quarter of 2012, the Fed believes, unemployment is forecast to be between 7.6% and 7.9%. That's barely moved since January, even though inflation has picked up. The Fed says that its most optimistic member sees unemployment no lower than 7.2% by late next year, and one member thinks it will still be as high as 8.4%.
I checked the data at the U.S. Department of Labor. According to the department, no president since the World War II has won re-election with unemployment anywhere near this high.
Can Obama win a second term if that continues? "It really makes it difficult," says Tom Whalen, a professor of political history at Boston University. "You want to run on a platform of success and demonstrated competency ... It's very rare for a president with that kind of unemployment to win a second term."
This is the political backdrop for the latest news out of the Fed.
News that has sent gold prices booming again and the dollar tumbling.
The markets are betting Ben Bernanke won't raise interest rates. Can't raise interest rates, even if he wants to. Even if inflation picks up.
The reason: Unemployment.
Of course no one at the Fed will tell you that. Bernanke spent a lot of Wednesday's press conference insisting inflation wasn't a big long-term threat.
But then he made this admission.
"The trade-offs are getting harder at this point," he said. While inflation is rising, getting higher, job growth is way too slow. And, "It's not clear that we can get substantial improvements in payrolls without some additional inflation risk."
"True unemployment rate could sink Obama http://on.mktw.net/m0Jdd3" 12:34 p.m. EDT, April 29, 2011 from MKTWArends
"Warning: Are commodities about to crash? http://on.mktw.net/hxqL7e" 12:05 a.m. EDT, April 27, 2011 from MKTWArends
"IMF bombshell: Age of America nears end http://on.mktw.net/faXYEy" 11:48 p.m. EDT, April 24, 2011 from MKTWArends
"Uranium is not going away http://on.mktw.net/fwjBer" 11:34 p.m. EDT, April 21, 2011 from MKTWArends
"S&P move good for gold, ominous for Treasurys http://on.mktw.net/gMJas8" 1:07 p.m. EDT, April 18, 2011 from MKTWArends
Brett Arends is an award-winning financial columnist with many years experience writing about markets, economics and personal finance in Europe and the U.S. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He was educated at Cambridge and Oxford Universities, and has worked as an analyst at McKinsey & Co. He is a Chartered Financial Consultant (ChFC) and Accredited Asset Management Specialist (AAMS). His latest book, "Storm Proof Your Money," has just been published by John Wiley & Co.
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