Economy rallying to Obama's advantage

The scene on Broadway hardly looked like it belonged in a nation still suffering the impact of the Great Recession. Manhattan's main street was packed with thousands of shoppers spending hard-earned cash in the holiday sales, store after store advertising up to 75 per cent off to get wary Americans back to what the nation so often does best - shopping.

It was working too. "I'm not spending money like there's no tomorrow," said Jamie Johnson, a New Jersey teacher who had travelled into the city for the day. "But I feel like I can spend a little, if I'm careful."

This is music to the ears of strategists plotting President Barack Obama's re-election campaign, as Iowa voters on Thursday kick off the long-awaited race to pick his Republican opponent. Though hardly a ringing endorsement of American recovery, it backs up a widespread feeling the world's largest economy is moving forward again after years in the post-2007 doldrums. If true, it'll undercut the Republicans' main attack in their 2012 bid to reclaim the White House.

"Consumers are not shopping until they drop, but they are shopping until they're tired. That's a lot better than it has been," said Joel Naroff, president of Naroff Economic Advisers. "The US is going into 2012 with some momentum building. The economy looks like it's going to be finding its footing."

No Republican activist or politician would dare admit it, but - strategically speaking - a recovering US economy is the last thing they wanted. Throughout 2011, as candidates slogged through the first voting districts of Iowa's rural counties and New Hampshire's small towns, they have sustained a relentless attack on Obama's handling of the economy. It was an easy song to sing.

With the official jobless rate stuck near 9 per cent - far higher in reality - Americans have endured a grim hangover from the Great Recession, coupled with embarrassment at Standard & Poor's historic downgrade of American debt that sparked hand-wringing over the country's lost sense of place in the world.

The dire state of the economy also propelled the right-wing Tea Party movement to attack government spending and then the leftist Occupy movement to assail the financial sector. In the middle was the erosion of the American middle class, beset by stagnant wages, cratered house prices and a job market defined by fear - a grim backdrop for any incumbent president trying for a second term.

But now, though hardly roaring forward, the US economy does appear to be improving. Since September, businesses have created an average of 150,000 jobs a month, the jobless rate inching down to sit at 8.6 per cent. Some forecasters believe the economy could grow 3 per cent in the fourth quarter of 2011, and one recent survey of top economists predicted a 2.4 per cent growth rate for 2012.

Though house prices are still dropping, house sales are rising and so is construction of new homes. Consumer confidence is also steadily recovering, all leading to a shift in perception that can only alleviate some of Obama's worst fears. . Now even Republicans admit the economic ground on which the 2012 campaign will be fought is shifting away from them. "I think [Obama] might be feeling a little better today than even four or five weeks ago," said Patrick Griffin, a political scientist and Republican strategist who has worked for presidential candidate Mitt Romney and former President George W. Bush.

The nascent economic upswing presents problems for whichever Republican emerges victorious from Iowa to become the party's frontrunner. It will no longer be enough to sympathise with the economic pain of the electorate if many voters are starting, even hesitantly, to feel better. Griffin said the nominee - which most experts believe will be Romney - will have to portray Obama as naive and out of touch with the cherished US free market. "You trust him once, don't trust him again. They will say Obama is too naive to understand basic market-driven economics," Griffin said.

It might work. Whatever the rate of growth in 2012, no one thinks roaring good times are just around the corner. The jobless rate is almost certain to stay above 8 per cent by election time in November, which could spell doom for any sitting president. Obama's approval ratings are low and the enthusiasm that propelled him to his 2008 victory has evaporated, especially among left-wing Democrats. But other factors are on Obama's side. The Republican nomination race has seen a topsy-turvy performance from the party's right-wing fringe. In an era of high joblessness, Romney's main claim to business acumen was a stint at Bain Capital, which bought companies and streamlined them by laying off hundreds of workers.

Among the economic debates of the 2012 presidential election, experts say the key is not the actual level of growth or the jobless rate or even consumer confidence but the trend that each number suggests. "It's not about absolute figures in the economy. It's about things moving in the right direction," said Professor Marc Hetherington, a political scientist at Vanderbilt University. As the crowds thronging Broadway, and shopping centres from Arkansas to Wyoming, are starting to show, the trend lines are starting to move in Obama's favour.Observer