Slowing Economy Puts Obama Reelection in Danger

The reduction of growth and increase in unemployment put the current U.S. president’s aspirations in danger.

In the first three months of this year, the U.S. revised the amount of growth achieved in this period (2.2 percent annually), reducing it to 1.9 percent; at the same time, the number of jobs created in April and May (77,000/69,000) were less than half those expected from the market and the lowest level in five months.

Because of this comes increased unemployment; it passed from 8.1 percent to 8.2 percent. And this happens five months before the presidential election.

Furthermore, the level of participation in the workforce has fallen more than two percentage points (63.8 to 66 percent) and 5 million workers have left the job market because of the impossibility of finding work. This raises the real level of unemployment to 10 percent.

The American electorate has few rules and offers scarce regularities.

But one of these is clear: Since World War II, if unemployment rose above 8 percent before November, the president in office lost the electoral competition.

The American economy is fundamentally composed of services (70 percent of GDP); this sector is the principal source of job creation, above all in the health sector. In April, this sector contributed 33,000 jobs, while the manufacturing industry created 12,000 jobs, highly skilled and remunerated.

The rate of growth in the long term for the American economy is 3.1 percent annually; it fell to 5 percent of national product in the recession of December 2007 to July 2009. If you add up the loss of a year and a half of potential expansion, America will have to recuperate almost 10 percentage points of the GDP at a much faster rhythm.

This is not happening. The level of growth in the recuperation phase that started in July 2009 has been 2.4 percent each year and fell to 1.9 percent in the first quarter of 2012, less than half of what would be necessary to recover the lost product.

The surprising part of the American situation is that this fall in the growth potential and its corollary, the increase in unemployment, happen while exports grow 16 percent, industrial production expands 6 percent each year and business earnings increased 9 percent in the last 12 months and are now experiencing the highest level in 70 years.

The result is that capital available to companies rises to $1.7 billion and, in the condition of transnational firms, accumulates in the exterior to a similar figure ($1.4 billion). However, the investment level is 23 to 25 percent less than in the stage previous to the crisis (2006-2007).

Capital available for investment is the highest it has been in 20 years and effective investment is a fourth less than that during the recuperation phase, which has taken place since July 2009.

The American paradox is the reticence to invest when there are enormous amounts of resources available to do so.

In this scene, from the U.S. emerges something deeply novel that modifies the conditions of accumulation and changes the precautions about its own indicators. The production of natural gas trapped in rocks (shale gas) has risen 12 times over the past 10 years and now provides 25 percent of domestic demand, and would be 50 percent in 2020. The eruption of shale gas grants the manufacturing industry a comparative advantage in entry costs — somewhere between 60 and 80 percent with respect to competitors in China, Japan, South Korea and Germany. In this decade the U.S. and Canada will transform globally into the principal providers of low cost energy; moreover, the U.S. will achieve self-sufficiency in energy, which modifies the strategic global equation.

What is predictable is an investment boom in the energy and manufacturing sectors and in all of the production chain, multiplying exports and a rise in the growth rate of 1 percent each year. The presidential election in November is five months away.