Struggling economy ups Romney’s odds

Mitt Romney is making the case that the 2012 election will be all about the economy, which right now is undoubtedly causing some sleepless nights for President Obama’s campaign team.

Obama wants the election to be about how Romney is too conservative — for women, for young people, for Hispanics, for the country. His argument is laid out in an interview released Wednesday by Rolling Stone.

{mosads}Romney “pre-butted” that argument Tuesday night after winning five GOP primary fights in convincing fashion. 

Pivoting to the battle with Obama, Romney said Obama wants to make the 2012 election “a campaign of diversions, distractions and distortions.” 

“That kind of campaign may have worked at another place over in a different time. But not here and not now. It’s still about the economy … and we’re not stupid.”

The economy gives Romney his best chance of defeating Obama, and three things will shape the economic context for the campaign — unemployment, housing and the European debt crisis.

None of those is moving firmly in a positive direction for Obama right now, which gives Republicans hope that Romney, a decided underdog to the president, can close the gap in the next seven months.

Let’s look at unemployment first. 

The rate has dropped to 8.2 percent in March from 9 percent in September, a significant fall that put some wind behind Obama’s sails and maybe even created a bit of overconfidence among some Democrats. 

The problem for Obama is that he is unlikely to see a similar drop from now until November. 

Economist Mark Zandi of Moody’s Analytics expects the unemployment rate to be 8 percent on Election Day, just two-tenths of a point lower than where it stands now.

“It will take a bit of luck for unemployment to be below 8 percent on Election Day,” he wrote in an email.

The economy looked strong in January and February as the nation averaged job gains of more than 200,000, but an unseasonably warm winter likely boosted those figures, and they are now being balanced out. 

Zandi expects the economy to gain 140,000 jobs in April when the Bureau of Labor Statistics releases its report for the month next week. Growth at that rate would do little to change the unemployment rate. 

Obama is getting some better news on housing, a key economic indicator that has been a huge problem throughout his presidency. 

Evidence is growing that the market is near to bottoming out. 

Housing market analysts at CoreLogic argue that “now is a good time to buy” because housing affordability is at its highest level ever. 

Another recent report from the group showed month-over-month prices increasing 0.7 percent in February from January, excluding distressed sales. 

While the same report said national home prices continued to decline on a year-to-year basis, the report offered more evidence that a long-awaited bottom to the housing crash might be found. 

“House prices, based on data through February, continue to decline, but at a decreasing rate,” said Mark Fleming, chief economist for CoreLogic. “The deceleration in the pace of decline is a first step toward ultimately growing again.”

Housing will remain a localized issue in many ways, and Obama could be hurt in swing states such as Nevada where the crisis is expected to linger the longest.

Still, rising home prices would greatly increase consumer confidence, which Obama needs if he is to win over voters on his handling of the economy. It could also provide a boost for hiring and the stock market, the third leg of the 2012 economy stool.

A strong stock market helps incumbent presidents, and Obama was certainly boosted earlier this year after the Dow Jones average soared from 11,231 on Nov. 25 to 13,252 on March 15.

The bullish market was sparked by the sense that Europe had rallied around a deal to control its debt crisis, but has since stalled amid talk of Spanish loan defaults and serious doubts that the crisis is over.

The herky-jerky nature of the markets in the last month hasn’t been enough to really injure Obama, but a significant drop in the summer could be devastating. Whether the world sees one is the great unknown for the two candidates and the Federal Reserve, which on Wednesday said: “Strains in global financial markets continue to pose significant downside risks to the economic outlook.”

Two reports earlier this year noted that incumbent presidents are likely to win if they’ve governed while stocks have risen. A critical period could be the three months before Election Day. InvestTech Research, an investment firm in Montana, found the incumbent party has won 15 of the 16 presidential elections in which the stock market climbed in the three months before Election Day. 

Falling unemployment, a rising stock market and the bottoming-out of the housing crisis won’t guarantee Obama a second term. But they would make it easier for him to turn the election into a referendum on Romney, forcing the Republican to eat his words.