(MintPress) – The United States Federal Reserve has lowered its economic outlook for the remainder of 2012, citing a forecast that predicts little change in the unemployment rate and reduced economic growth. The announcement could hinder President Barack Obama’s reelection bid in November, as the economy has consistently been cited as the main concern for voters heading up to the election.
With the current unemployment rate of 8.2 percent, the Fed noted that it does not expect the rate to dip below 8 percent in 2012. Early forecasts for the year were looking positive as the job market averaged an increase of 252,000 openings from December to February. But the rate halted dramatically, now only averaging 96,000 new jobs a month.
In his report, Federal Reserve chairman Ben Bernanke said the Fed expected the economy to grow between 1.9 and 2.4 percent for the remainder of the year. The projection is a disappointing turn for many economists, who projected greater growth this year. The University of Indiana’s “Indiana Business Review” (IBR) projected at the beginning of the year that the positives would far outweigh the negatives and that the economy could see month-to-month growths in the 1 to 3 percent range. The group said that range was contingent on consumer habits, however.
“The pace of the recovery, however, will not improve until consumers have increased their savings and repaired their balance sheets,” IBR wrote. “This process will extend beyond the end of 2012.”
Late last year, consumer savings rates fell to the lowest since 2007, with consumers putting an average of 3.6 percent of their money into savings.
Also of concern from the Fed’s report was the fragile state of the housing market. The national rate of a fixed-rate 30-year mortgage is a low 3.71 percent, just slightly above the lowest recorded rate since the 1950s of 3.67 percent.
Playing politics
A stagnant economy under Obama’s presidency has the potential to influence voter bases around the country, as a Gallup poll from earlier in the year continued to show that the economy is the most important issue to voters. Ninety-two percent of the polls’ respondents said that the economy was extremely or very important to them. Eighty-two percent said unemployment fell into the same categories while the federal budget deficit garnered 79 percent of the vote.
All that does not bode well for Obama, said Sung Won Sohn, an economics professor at California State University. Sohn told the Associated Press (AP) that he was surprised the unemployment outlook wasn’t bleaker, but that the report should cause concern for Obama regardless.
“If the Fed’s forecast unfolds, that would be bad news for incumbent politicians,” Sohn said. “If I were President Obama, I would be worried.”
Joe Brettell, a Republican strategist, also told the AP that Republican presidential nominee Mitt Romney could make a good run at the White House if he focuses his attacks on Obama’s economic principles that have contributed to the current state of the economy.
“If I’m Mitt Romney, I immediately use Bernanke’s comments to make the case that what I’ve been saying is right: Barack Obama isn’t working, the stimulus has failed and the only way to take us out of this is to make a change in the White House,” Brettell said.
A new Associated Press-GfK poll suggests those economic anxieties are already settling in for voters. The poll showed that 3 in 10 Americans believe the economy is going in the right direction. The poll suggested Obama still had a slight edge over Romney, with 47 percent saying they would vote for Obama, and 44 percent leaning toward Romney – a pair of figures the poll conductors say is not a statistically significant advantage.
The economic situation, muddled with the upcoming presidential election, has left many voters toiling over who to vote for and, in some cases, leaning toward blind faith. Poll respondent Raymond Back, who voted for Obama in 2008, said the economic situation has lost Obama his vote, despite not knowing how other candidates would handle the economy.
“I’m not going to vote for Obama,” Back said. “It’s just the wrong thing to go. I don’t know what Romney is going to do, but this isn’t the right way.”