Will voters still have a GROWTH bias in the coming election or will LEVELS hurt?

David Leonhardt thinks growth trumpets:

If you looked only at how strong the economy was in 2000 and 2004, the elections would surprise you. If you looked at the growth rate, however, the outcomes look unsurprising.

Voters, it seems, have short memories. Nothing appears to have a bigger influence on presidential elections than the pace of economic growth in the year leading up to the election. Keep that in mind when you hear simple comparisons about no president having won re-election when the unemployment rate was above a certain level. Ronald Reagan easily won re-election with the rate above 7 percent. Mr. Gore lost with the rate below 4 percent.

He goes on:

When Al Gore went before voters in November 2000, as a sitting vice president promising to continue President Bill Clinton’s economic policies, the economy was in excellent shape. The unemployment rate had fallen to only 3.9 percent, and middle-class incomes were growing at their fastest clip in a generation.

Yet over the course of the 2000 campaign, the economy also slowed markedly. Monthly job growth at the start of the year was almost 300,000; by November, it was only about 100,000. If Mr. Gore had the benefit of an economy functioning at a very high level, he did not have the benefit of one growing at a rapid rate.

Four years later, when President George W. Bush was running for re-election, the economy was in far worse shape than it had been in 2000. The unemployment rate was roughly 5.5 percent in late 2004 and would have been higher if so many people hadn’t dropped out of the labor force, neither working nor looking for work.

But the economy was also beginning to improve and to escape the jobless recovery of 2002 and 2003. Even if the level of economic activity in 2004 was vastly different from the level in 2000, the rate of growth in the two years was quite similar.

In the 12 months ending in November 2000, according to the Labor Department’s survey of employers, nationwide employment grew by 1.6 percent. In the 12 months ending in November 2004, it grew by an identical 1.6 percent. In the months immediately before the two elections, job growth was actually stronger in 2004 than 2000, helping Mr. Bush to win re-election narrowly.

Let´s picture this and also include the election year 2008.

Leonhardt´s arguments seem right. For example, in 2000 employment level was high but employment growth was falling and the monthly change in employment was weak. In 2004 the level of employment at election time was about the same as at election time in 2000 (but note that population and labor force had grown in the interim period), employment growth was the same as in 2000 but rising, while the monthly change in employment was rising and much more robust than in 2000.

2008 is a “no brainer”. All measures were fast coming down and growth rates were negative.

What do we have so far in the last 12 months going into the 2012 election? The level of employment now is still about 3.5 million short of what it was when Obama was elected. The growth in employment is weak and falling while the change in employment is quite low and falling fast. This could change in the five months before the election. But they would have to change by unrealistic amounts in order for the “level pain” to be anesthetized by “growth”.

This Tim Duy post indicates that that´s very unlikely:

Bottom Line:  The data flow is soft, but Dudley indicates it is not soft enough to ease.  And while some are pointing to falling TIPS-derived inflation as given the Fed room to move, they have traditionally delayed until conditions are direr (they are not exactly prone to overshooting in the first place).  The Fed doesn’t think they will ease further; they think their next move will be to tighten.  Which means that financial conditions will need to deteriorate dramatically to prompt action in June.  So if you are looking for the Fed to ease in just four weeks, you are looking for financial markets to turn very, very ugly.  Lehman ugly.  And I wish that I could say that it won’t happen, but European policymakers are hell-bent to push their economies to the wall while worshipping at the alter of moral hazard.

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