Dark economic clouds gather anew over Obama campaign

WASHINGTON (Reuters) - After a month in which his re-election campaign picked up momentum, hard economic realities are about to hit President Barack Obama as he takes to the road on a campaign bus trip through the Rust Belt.

Poor manufacturing data earlier this week followed by a likely weak jobless report on Friday are reminding Obama that he has a lot of work to do to convince voters he is bringing the economy back to full health.

A Supreme Court victory for Obama on healthcare and a surprise expansion of immigration laws that put Republican opponent Mitt Romney on the defensive on the issue may soon fade from memory.

"By Friday, the Supreme Court will be in the rear-view mirror and everybody will be talking about the state of the economy," said Greg Valliere, an analyst for institutional investors at Potomac Research Group.

"I think the debate on Friday will be whether the economy is still growing or whether we've hit a brick wall," he said.

U.S. manufacturing activity contracted in June for the first time in nearly three years, data showed on Monday, stark evidence of a slowing economic recovery and that Europe's debt crisis is weighing on the U.S. economy.

And the monthly jobless figures, the most closely watched economic indicator, are expected to be lackluster.

Economists polled by Reuters expect nonfarm payrolls to have risen by only 90,000 jobs in June and the unemployment rate will stay unchanged at 8.2 percent. Employers likely increased hiring, but not enough to dispel concerns that the economy is losing steam.

The fiscal gloom allows Romney to re-energize his charge that the White House is not creating jobs quickly enough, after his nonstop economic criticism was drowned out by last week's Supreme Court ruling that Obama's 2010 healthcare law is constitutional.

"From day one of his administration, the president has pursued policies that have hurt job creators, hurt the manufacturing sector, and left millions of Americans struggling to find work. It's going to be hard for the president to argue Americans should gamble on a second term while on his bus tour," Romney campaign spokeswoman Amanda Henneberg said.

Romney also struggled recently to explain his immigration position after Obama forced the issue on to the agenda by halting possible deportations of young illegal immigrants. The immigration debate helped Obama in polls.

RUST BELT PUSH

Obama begins a two-day campaign bus tour through Ohio and western Pennsylvania on Thursday. No matter how the unemployment report comes out, he will remind voters his bailout of the U.S. auto industry helped save jobs in the area.

In a tough economic climate, polls show that Obama still comes across as likeable although he does have a problem winning over white, middle-class male voters.

"Whoever does a better job of showing empathy will have a better chance of winning in November," Valliere said.

Obama led Romney 48 percent to 43 percent in Gallup's daily national tracking poll on Tuesday, the sixth consecutive day in which the survey has shown the Democratic incumbent with a statistically meaningful, if small, lead.

The five-point edge was Obama's largest lead in Gallup daily tracking since April, and his longest such streak since then.

But economic clouds could again darken his re-election chances on November 6.

"Everybody is concerned about the prospects for the economy. There are two huge issues. One is Europe and the second is our own fiscal cliff," said Isabelle Sawhill, a budget expert at the Brookings Institution, referring to programmed cuts in the U.S. budget and rising taxes next year, unless congress acts to avoid them.

"The concerns and the fears... have already begun to undermine confidence in the economy and cause both consumers and businesses to hold back on what they are willing to spend," she said.

Obama's campaign points to steady, if slow, improvement in the economy since he has taken office, and says he could have done more if Republicans in Congress had not blocked his efforts to stimulate growth.

"Clearly, the economy is not functioning as well as we know that it could be. The political question is who are people going to point the finger at in doing that," said Heather Boushey, an economist at the liberal Center for American Progress, which has close ties to the White House.

"The biggest problem in our economy is the U.S. Congress," she said.

ROMNEY JET-SKIING

While the poor economy hurts Obama, it also holds risks for his rival.

Unrelenting Democratic attacks calling Romney a job killer during his time as a private-equity executive have helped drag down his poll numbers.

Romney is spending the week at his $10 million lakeside New Hampshire vacation estate, which features a three-vessel boat garage and where he and his wife have been photographed skidding across the lake on their personal watercraft.

That could provide fresh fodder for the Democrats' portrayal of Romney as out of touch with ordinary Americans.

"It's a bad headline. It can help reinforce or enforce perceptions, whatever they may be," said Ethan Siegel, an analyst at the Washington Exchange, which tracks political developments for investors.

However, economic worries are much more prominent in voters' minds that Romney's vacations.

"In the end, no one's going into the voting room, saying 'Romney, he was in New Hampshire for the 4th of July and I'm voting no.' It's buzz, it's chatter but it don't matter," Siegel said.

(Additional reporting by Deborah Charles; Editing by Alistair Bell and Philip Barbara)

Source: http://news.yahoo.com/dark-economic-clouds-gather-anew-over-obama-campaign-230843669--business.html

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