Waning consumer confidence could spell doom for President Obama’s re-election campaign.
The University of Michigan’s consumer sentiment survey pegged confidence at 76.4 for April, a negligible amount above the March rating—placing Obama at confidence levels that have turned incumbents into one-term presidents.
"The current level of consumer confidence is consistent with losing reelection campaigns," said Dan Clifton, head of policy research at Strategas, a financial consulting firm.
Former presidents George W. Bush, Bill Clinton, and Ronald Reagan enjoyed consumer confidence levels above 90 en route to winning re-election, according to the University of Michigan survey. Confidence plummeted below 80 during the failed reelection bids of Jimmy Carter and George H.W. Bush.
April provided mixed relief for the administration. Hope among small business owners rose, due in part to rising prices—but that metric has also left consumers increasingly uncertain.
The Small Business Optimism Index rose two points in April to 94.5, as some entrepreneurs plan to hire new workers and make capital investments, according to the National Federation of Independent Business, a small-business association.
Bill Dunkelberg, who has run the small-business survey since 1973, said April’s uptick is still a long way from recovery.
"Typically in a recovery, you’d be up between 105 and 107; you’d see a real surge in spending and hiring. A 94 is what you’d consider a high-level in a recession," he said, of the Small Business Optimism Index. "There’s too much uncertainty ahead."
Nearly half of the 1,800 small businesses surveyed said they planned to create new jobs in the long-term, a five percent increase over March.
Of the businesses that do not plan to hire, one in four blamed uncertainty in Washington, according to Dunkelberg.
"There’s too much uncertainty ahead: no budget for three years, taxes, labor costs, healthcare, regulations, the EPA," he said. "We’re on a bad path that looks like a European course and politicians don’t seem to know how to deal with that."
While the job market growth remains idle, prices have risen.
"Price hikes were quite pervasive as owners respond to rising input costs (labor and materials) and try to pass those costs on to customers," the report said. "Twenty-five percent of owners plan on raising average prices in the next few months, while 2 percent plan reductions."
Yet the confidence among small businesses has done little to move that of consumers, who expressed even more uncertainty about their economic future. Consumer confidence fell for the second consecutive month, dropping to 69.2, according to The Conference Board, another business group.
"Without renewed gains in jobs and incomes, economic optimism will remain at lackluster levels," said economist Richard Curtin, director of the Thomson Reuters/University of Michigan Surveys of Consumers.
A record number of workers have dropped out of the job market under the Obama administration. That has helped to lower the unemployment rate to 8.1 percent in April, but has also lowered the U.S. labor participation rate to its lowest level since 1981.
Meanwhile, investors and economists see more problems ahead if Obama does not prevent the largest tax increase since World War II from taking effect in 2013.
"It would be best to quickly reduce uncertainty about future tax rates which are now scheduled to increase at the start of 2013," Curtin said. "If no decision about bridging the fiscal cliff is made until after the November election, consumers are likely to become more cautious spenders, especially higher income households toward year end, and those delayed spending decisions will become more widespread the closer the election."
Obama is unlikely to act on the record tax hikes before the election, according to several budget sources familiar with the pending economic drag.
The pessimism has not stopped Obama from trying to spin the weak recovery. On Monday, his campaign released a $25 million advertising blitz in nine battleground states touting the president’s economic record and blaming George W. Bush for the poor economy.
"2008: an economic meltdown; 4.4 million jobs lost; America’s economy spiraling down. All before the president took the oath," the ad’s narrator says. "Today…instead of losing jobs, we’re creating them: over 4.2 million so far."
The recession’s devastating job losses, however, have not been followed by a spur of new hires, as is typical in recovery. The economy added only 115,000 jobs in April and less than 50 percent of recent college graduates have been able to find full-time work within a year of graduation. A hiring boom does not appear to be on the horizon, at least not in the private sector, according to the latest Bureau of Labor Statistics jobs report.
"Over the 12 months ending in March, the hires rate (not seasonally adjusted) was unchanged for total nonfarm and total private but increased for government. The hires rate declined over the year in construction," the report said.
Other areas of confidence have stagnated in the spring, as well. People quit their jobs at unchanged levels in March—an indicator of unease, according to the BLS.
"Generally in the economy people tend to quit their job if they think that there are other jobs out there for them," said Bureau of Labor Statistics economist Guy Podgornik, adding that BLS does not ask why employees quit their jobs.
The Obama team remains confident it can overcome the confidence gap.
"You’ll see us unveil an advertising campaign, an extensive advertising campaign, that is very much about where we were and where we’ve come and the things that we’ve accomplished, the revitalization of the auto industry, the distance we’ve traveled from when we were losing 800,000 jobs a month," Obama senior adviser David Axelrod told ABC’s "This Week" on Sunday.
"We’re certainly running on our record," he said.