Election-year recession may hurt Republicans

By Emily Kaiser - Analysis

WASHINGTON (Reuters) - Wall Street is bracing for an election-year recession that a growing number of economists say is inevitable, and history suggests Republicans should be particularly nervous.

Voters don't look favorably upon the incumbent party that has the misfortune of presiding over a downturn.

Ask Jimmy Carter, whose 1980 campaign against Ronald Reagan failed after the Iranian Revolution sent oil prices soaring and tripped the U.S. economy into a brief but painful recession.

Former President George H. W. Bush, father of current President George W. Bush, blamed a recession that ended in March 1991 in part for his poor showing against Bill Clinton in 1992 -- the campaign that spawned the infamous "It's the economy, stupid" quote.

"The Republican candidate is going to be faced with a conundrum that they're already running away from Bush on the Iraq war, and now they're going to have to do it on the economy too," said Kenneth Rogoff, a professor at Harvard University and former chief economist of the International Monetary Fund.

Worries about a recession have steadily grown in recent months as a housing downturn and a spike in mortgage defaults led to billions of dollars in losses at banks. That has shaken global financial markets and prompted lenders to crack down on the easy money that helped drive strong economic growth in recent years.

Economic worries intensified on Friday when government data showed the job market was faltering. The economy created far fewer jobs than expected in December and the unemployment rate jumped to a two-year high of 5 percent.

On Wednesday, well-respected investment bank Goldman Sachs joined the ranks of economists saying that the U.S. economy was in or near a recession, noting that steep declines in employment are invariably associated with imminent downturns.