1. Election 2016: Politics and the Economy

2. Incumbent Party Loss Unemployment Rate Incumbent Party Win Year
Winner: Kennedy Johnson Nixon Nixon Carter Reagan Reagan Bush Clinton Clinton W Bush W Bush Obama Obama Obama
Year

3. Unemployment Rate in Presidential Election Years
Only time since 1960 an incumbent president has won reelection with an unemployment rate above 7% was President Ronald Reagan in 1984.
Of the seven presidential elections since 1960 that have seen around 5% in unemployment rate, the incumbent party only lost twice (‘60 – Kennedy, ‘08 Obama)
Of the five times the incumbent party won, four were incumbent presidents (Johnson ‘64, Nixon ‘72, Clinton ‘96, George W Bush ‘04), and the other was an incumbent Vice President (Bush ‘88)
Oddly, both times the unemployment rate was below 5% (3.6% in ‘68 and 4% in ‘00), the incumbent party lost.

4. % 3rd Quarter GDP Growth Year Incumbent Party Loss Incumbent Party Win
Winner: Kennedy Johnson Nixon Nixon Carter Reagan Reagan Bush Clinton Clinton W Bush W Bush Obama Obama
Year

5. 3rd Quarter GDP Growth in Presidential Election Years
Since 1960, no incumbent party has won presidential reelection with 3rd Quarter GDP Growth equal to or below 2%.
Twice has the incumbent party lost reelection with 3rd Quarter GDP Growth above 2%
1968 – Nixon defeats Humphrey (2.8%)
1992 – Clinton defeats George HW Bush (4.2%)

6. Incumbent Party Loss Incumbent Party Win
Current Presidential Approval Rating
Kennedy Johnson Nixon Nixon Carter Reagan Reagan Bush Clinton Clinton W Bush W Bush Obama Obama ???
Year

7. Presidential Approval Rating in Presidential Election Years, 1960-2008
Only twice has the incumbent party lost when the president’s approval rating was between 50%-60%
‘60 Kennedy, [58% for Eisenhower]
‘00 George W Bush [57% for Clinton]
Three presidents won reelection as incumbents in this range
‘72 Nixon (59%), ‘84 Reagan (58%), ’94 Clinton (54%)
Only once has a challenger from the incumbent party in this range won
‘88 Bush (51% for Eisenhower)

8. Presidential Approval Rating in Presidential Election Years, 1960-2008
Since 1960, only once has an incumbent party won with a president whose approval rating is below 50%....
‘04 George W Bush, 47%
Incumbent party lost the other five times
‘68 Nixon [42% for Johnson]
‘76 Carter [47% for Ford]
’80 Reagan [37% for Carter]
‘92 Clinton [34% for Bush]
‘08 Obama [31% for George W Bush]

9. This means….
Democrats will benefit if unemployment continues to decline
Republicans will do well if the GDP stays at or close to 2%.
The President’s approval rate can either help/hurt his party.
Important to track these numbers as it gets closer to Election Day to see if they predict the results.

10. How can political scientists make predictions about the election using economic data?

11. Economic Indicators Statistical data showing trends in the economy.
Examples are unemployment, housing starts, Consumer Price Index (CPI), industrial production, bankruptcies, GDP-Gross Domestic Product, stock market prices, money supply changes, and housing starts.

12. Leading Economic Indicators
An economic indicator that changes before the economy has changed.
Examples of leading indicators include production workweek, building permits, unemployment benefits claims, money supply, inventory changes, and stock prices. The Fed (Federal Reserve Bank) watches many of these indicators as it decides what to do about interest rates.

13. Coincident Indicators
There are also coincident indicators which change about the same time as the overall economy
Non-farm payrolls is a popular coincident indicator. Other examples for a coincident indicator include industrial production and personal income. Sales figures from manufacturing and trade are another source for coincident indicator assessment.

14. Lagging Indicators
A measurable economic factor that changes after the economy has already begun to follow a particular pattern or trend.
Some examples are unemployment, corporate profits and labor cost per unit of output. Interest rates are another good lagging indicator; rates change after severe market changes.

15. Everyday Economic Indicators
Informal observations that help economists make predictions about the economy.

16. Skyscraper Boom Indicator
Building booms will precede and then coincide with recessions.
The taller the buildings-the longer the crisis
During the Great Depression:
Three of the world’s tallest buildings were under construction.
40 Wall Street
Chrysler Building
Empire State Building

17. Hemline Index George Taylor- 1926
Hemlines on women’s dresses rise with stock prices
As prices fall, so do hemlines.
Beginning of Great Depression
1967- Good economic times

18. Desserts Index
Desserts purchased in restaurants decrease when consumers believe the economy is about to go into a downturn.
Also: when the economy is on the rise there will be an increase in the amount of higher priced coffees and lattes.

19. Taxi Index
When consumers feel the economy is weak, they use taxis less
With an economic upswing they will start to use cabs more frequently.

20. Men’s Underwear Index
Men will forgo purchasing new underwear during difficult economic times.
Research firm Mintel estimated that men’s underwear sales fell 2.3% in 2009, the first time since
2003

21. Lipstick Index
When facing economic crisis consumers will buy less costly luxury goods such as lipstick.
After 9/11 sales of lipstick sharply rose
People will still buy luxury goods, but they will be more affordable items instead of furs, designer clothes, etc.

22. Make your own predictions about the 2016 Presidential race
Design an everyday indicator or use one of the ones discussed in class
Go out into your community and observe consumer behavior. Record your observations
Based on your knowledge of past presidential races and the relationship of the race to economic indicators, make a prediction about the outcome of the 2016 presidential race.