"Stocks plunged, driving the Dow Jones Industrial Average to close down more than 500 points, as investors appeared to lose faith in the ability of the world's policy makers to revive the global economy and stave off a rolling debt crisis in Europe.
The Dow slid 512.61 points, or 4.3%, to 11383.83, erasing all its gains for 2011. The slump of the past few weeks has driven the Dow down more than 10% from its May intraday highs, putting the index officially in correction territory.
The Standard & Poor's 500-stock index fell 60.26 points, or 4.8%."To similar effect, we learn today that:
“The number of people claiming new jobless benefits remained broadly flat at an elevated level last week, pointing to persistent weakness in the U.S. labor market. New claims for unemployment insurance fell by just 1,000 to a seasonally adjusted 400,000 in the week ended July 30, the Labor Department said Thursday.”
I'm reminded of the quote attributed to James Carville and used in the (successful) campaign to unseat then-President George W. Bush:
"It's the economy, stupid."
The same thing may apply to the Presidential race in 2012.
While it's far too soon to make any meaningful predictions, if unemployment is still in the neighborhood of 9.2%, and the market has not made significant progress, there may be a fatal impact on President Obama's re-election chances, irrespective of whether or not he has done a good job in other areas.
That certainly was the experience of Bush, Sr. and may give us some perspective as we discuss policy choices, and the effects of the choices already made, over the next 15 months.
Although the Democratic party is apparently "pivoting" to emphasize jobs after the debt deal in Congress earlier this week, the constraints of that deal on additional spending may make it very difficult to provide adequate stimulus to generate any substantial level of new jobs.
This is particularly important since, in the past, the President has cited gains in the stock market as evidence of a recovering economy. It's not unfair to now ask if downward trends in the market will be blamed on the President's policies. I'm sure that Republican candidates will say that the President can't have it both ways.
Among other things, it will clearly be difficult for the President to claim that the stimulus has turned the economy around, if it is still in deep trouble by the Summer of next year.
For an additional perspective on this, see the post by Jennifer Rubin (whom I respect, but who is also much more partisan than I am) at www.washingtonpost.com/blogs/right-turn/post/stock-market-tanks-obama-recovery-is-a-fantasy/2011/03/29/gIQA4LZouI_blog.html