Debate performances and campaign-trail zingers are generating most of the chatter in the final weeks of this year's presidential election. But it turns out that President Obama may have one thing going for him that he's not supposed to—the direction of the economy.
The Republican candidate, Mitt Romney, has built his entire campaign around the weak performance of the economy under Obama. And seemingly every week, there's a fresh report on the fading fortunes of the middle class. At the same time, however, the economy has been healing in small and sometimes imperceptible ways that gradually seem to be lifting the spirits of voters—which is obviously good news for Obama.
The latest jobs report captures the stutter-step improvements in the economy. Total job creation in September was a weak 114,000 (200,000 or more would be considered healthy). But upward revisions show that a lot more jobs were created over the summer than previously thought. "The revisions tell us basically that the economy never slowed," economist Justin Wolfers of the University of Pennsylvania's Wharton School tweeted after the jobs report came out. "Q3 was a good quarter."
In important pockets of the economy, things are much better than the headline numbers suggest. The unemployment rate among college graduates, for example, is just 4.1 percent, compared with 7.8 percent for the nation overall. That's good for Obama because highly coveted independent voters tend to be better-educated than Republicans, which means more of them may be benefiting from the parts of the economy that are improving—making them more inclined to grant Obama another four years.
Big companies, meanwhile, may not be hiring much, but they're not firing much either. Outplacement firm Challenger, Gray and Christmas reports that the pace of layoffs is the lowest in more than a decade. That's largely because firms cut so drastically over the last few years that there's little left to cut. But whatever the reason, job security is improving for those who do have jobs.
Housing is another sector that is finally turning the corner, after a real-estate bust that lasted six years. "The dynamics of a sustained recovery are kicking in," Merrill Lynch informed clients in a recent report. Home prices have now inched up for six consecutive months, which is a huge relief for homeowners who no longer have to watch their largest asset continually fall in value. There's no reason to expect another boom, since banks are still tight with loans and high unemployment is keeping too many people out of the market. But the gradual improvement in housing is far better than the free-fall of recent years.
The stock market, up 17 percent so far this year, is another thing that's helping many Americans rebuild wealth lost during the recession. The Federal Reserve's aggressive monetary easing is probably gassing stock prices, which leaves some investors skittish about what will happen when the Fed eases up on the throttle. Yet the market keeps defying predictions of a correction, with real wealth accruing to those willing to invest in stocks and risk a downturn.
There are other telltale signs of a healing economy. Car sales have been strong, which shows that many consumers are comfortable enough about their finances to commit to large purchases. Americans have been paying down debt and making important repairs to their household finances. The delinquency rate on credit cards has now fallen to the lowest level since 2001. This represents the "deleveraging" that economists say must happen in order for many overspent consumers to get back on their feet. It's not over, but consumers are making steady progress.
Consumers, in fact, have been far more upbeat than economists expect. Confidence surveys, for example, have generally shot upward over the last couple of months, largely because Americans are becoming more optimistic about the future. "The strong bounce back in confidence is encouraging for the consumer outlook," Moody's Analytics wrote recently.
The biggest worry these days isn't even the economy, per se. It's Washington, and whether politicians will botch the momentous set of decisions on spending cuts and tax hikes coming at the end of the year, driving the economy over the "fiscal cliff." The latest Vistage survey of CEOs of small- and medium-sized businesses shows a marked drop in confidence between the second and third quarters of 2012. But the biggest reason for that is uncertainty over the outcome of this year's elections and the battle over taxes and spending that will immediately follow it. Even so, half of the CEOs said they plan to hire in the coming year, with just 9 percent saying their firms will shed workers.
None of this invalidates the decline in median income, the still-high jobless rate, or other factors that reflect real struggles for many Americans. Yet the reports and statistics that we use to gauge the health of the economy often lag reality. The studies that routinely highlight the woes of the middle class, for instance, are usually based on data that's two or three years old, which means they don't capture improvements that may be making voters feel better this fall. The election, in some ways, will be a more accurate measure of Americans' well-being than most economic metrics.
There's still plenty of pain in the economy for Mitt Romney to highlight while he continues to bash Obama's performance. "This is not what a real recovery looks like," Romney said in a statement following the latest jobs report. "The results of President Obama's failed policies are staggering." That may be true for some voters, but the question is whether enough of them will agree with him on Election Day.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.