A little less than 11 months from now, Americans will decide whether to renew President Obama’s contract for another four years. Unless an event or a set of circumstances suddenly makes national security the focus, the outcome will ride on the economy and whether a majority of Americans possess sufficient hope that the state of the nation is changing for the better. Or, more accurately, whether the economy and the state of the nation are more likely to change for the better if Obama is reelected. Hope and change were the operative themes in 2008, and they may well be again in 2012. The question this time, though, is whether voters feel hopeful enough that things are changing for the better.

Obviously, nothing is ever quite that cut and dried. If Republicans nominate someone whom swing voters find unpalatable, or if the GOP nominee self-destructs, Obama will benefit. But, generally speaking, when a president is seeking reelection, the campaign is usually more about the incumbent than the challenger, and the economy is the overarching issue.

Conventional wisdom says that the economy will improve little over the next year and that the unemployment rate will not significantly decline, producing strong political headwinds for Obama and his reelection hopes. Although the financial crisis and the ensuing economic problems preceded Obama’s inauguration, he now owns the economy—unfairly or not.

The drop in the unemployment rate from 9 percent in October to 8.6 percent in November raises the legitimate question of whether the picture is brightening for the economy and the incumbent. Some analysts noted the similarity between November’s 8.6 percent unemployment rate and the 8.5 percent jobless rate in November 1983, a year before President Reagan won reelection in a 49-state landslide. Unemployment had been a bit worse for Reagan earlier in his first term than it was for Obama, 10.8 percent for the former compared with 10.1 percent for the latter. Reagan got to enjoy a strong “V” shaped recovery where unemployment fell to 7.2 percent by Election Day. But no economists anticipate such a swift recovery now.

Although economic forecasting is more perilous than political prognosticating, the consensus among economists is that the employment situation is not improving very much. In December’s Blue Chip Economic Indicators survey of 55 top economists, the average forecast for unemployment in 2012 is 8.8 percent. The 10 most optimistic projected an 8.4 percent annual rate, while the 10 most pessimistic said 9.2 percent. Drilling down a bit more, the consensus is that unemployment will average 8.8 percent for this current quarter and stay at that level for the first two quarters of 2012. Then economists expect a slight improvement of one-tenth of a point in the third quarter of 2012—the three months leading into the election—at 8.7 percent (the 10 most optimistic, 8.3 percent; the 10 most pessimistic, 9.2 percent); and for the fourth quarter the average was 8.6 percent (the bears saying 8.1 percent; the bulls, 9.2 percent).

Thus, the consensus is that unemployment won’t move as much as the November rate suggests, that Obama will see only a slight improvement in the jobless figures over the next few months, and that by the time of the election, the rate will be about where we already are. More broadly, the pros expect the U.S. to experience decent economic growth in this current quarter, about 2.7 percent, then slow down to 1.9 percent in the first quarter of next year, go up a touch to 2.1 percent in the second quarter, up another touch to 2.3 percent in the third quarter, and then rise to 2.6 percent in the fourth quarter of next year.

The dynamics of this downturn are far more challenging than your typical, run-of-the-mill recession-recovery cycle. Housing usually leads recoveries, but this time the real-estate market is exacerbating the problems. On top of all the domestic woes is the European financial crisis, with many economists fearing that the Continent may have already entered a recession. Thus a myriad of problems are preventing the kind of economic rebound that boosted Reagan’s reelection.

Which way will this presidential race go? One clue will be the December unemployment figures, to be released on Jan. 6. Watch for whether November’s 8.6 rate is revised upward and if the December numbers confirm or repudiate the revised November numbers. The figures will go a long way in determining Obama’s chances.

This article appeared in the Saturday, December 17, 2011 edition of National Journal.

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