James Pethokoukis with The American Enterprise Institute (AEI) in DC is one of the sharpest people out there writing on business and the economy. He has some interesting charts up on AEI’s The American website — tracking real income in the US to national election results. Basically, when disposable income doesn’t grow sufficiently — the party in power loses at the polls.
Trends show that you need real disposable income to grow at least 2 to 2.5% in order for the party in power to get a majority of the vote. Clinton had 2% in 1996 and George W. Bush had nearly 3% in 2004. Reagan had 6% in 1984. Johnson had 5.5% in 1964. Nixon had 3% in 1972. George H.W. Bush saw an increases between 1.5 and 2.0 % in 1992 when he lost to Bill Clinton. It appears Obama is currently looking at 0.3 to 0.5% heading into the campaign season. This was Pethokoukis’s take on the data:
While most of the economic focus today is on March’s tepid job growth and the unemployment rate, incomes may well play a bigger political role than jobs in 2012. And the numbers today didn’t look too hot. Wages are going the wrong direction. The Center for Economic and Policy Research:
One very discouraging item in the survey was a 0.1 hour drop in the length of the average workweek. While the data are erratic, the drop was driven largely by a decline of 0.3 hours in nondurable manufacturing, a sector where hours tend to be better measured. Wages continue to go nowhere. The average hourly wage has increased at just a 1.85 percent annual rate over the last quarter, which likely puts it behind inflation. The wage for production, non-supervisory workers, which better tracks the median wage, increased at just a 1.37 percent annual rate over this period.
Few economists think the economy will grow much more than 2.0% to 2.5% this year. That is a recipe for more wage stagnation — at best — and perhaps a tough time for Team Obama this fall.