WASHINGTON With a leading Republican candidate yet to emerge, the biggest risk to President Barack Obama's quest for a second term next year is a jobless rate that has hovered between 9 and 10 percent for months.
Friday's jobless report is expected to show nonfarm payrolls soared in February by 185,000 jobs, but the overall unemployment rate is nonetheless expected to edge up to 9.1 percent.
Former House speaker Newt Gingrich is edging toward entering the presidential race but heavyweight Republicans like him have yet to formally line up to oppose Obama in the 2012 election, making the monthly unemployment report one of the best early guides to the president's re-election prospects.
Analysts say the jobless rate needs to drop below 8 percent by autumn 2012 for voters to feel optimistic about the economy -- and Obama's handling of it -- when they go to the polls that November.
"The problem for President Obama is that the window to achieve that kind of growth is closing. Without significant job growth this year, he will be in an economically challenging position to open the 2012 race," said Matt McDonald, an analyst at the Washington policy advisory firm Hamilton Place Strategies.
Voters may be temporarily captivated by turmoil in the Arab world, disputes between Republican state governors and unions or policy squabbles in Congress, but no issue preoccupies Americans as persistently as their own bank accounts and job outlook.
"Unemployment is the best-known measure of the health of the U.S. economy and it's an indicator of economic performance that is lagging badly," said economist Gary Burtless at the Brookings Institution, adding that the jobless rate would become more important closer to the November 2012 election.
McDonald estimates the economy needs to add 190,000 jobs per month in the next 1-1/2 years for unemployment to drop below 8 percent by Election Day 2012. "If more people are getting jobs, they are happier about the economy and happier about the job that the president is doing," he said.
CLOSE RACE EXPECTED
Besides Gingrich, senior Republicans including former governors Mitt Romney and Tim Pawlenty are thought to be planning to seek the Republican presidential nomination, though none has formally announced a plan to run.
And no-one has emerged as a Republican favorite. The famously outspoken Gingrich is remembered from his years in Congress as a polarizing figure.
And Romney, a leading candidate in the 2008 presidential race, is accused of having "flip-flopped" on issues. Former Alaska governor Sarah Palin, while a darling with some media, is seen as popular only with the most conservative voters.
As of now, the presidential election is expected to be very close, whoever ends up running against Obama.
A recent Gallup poll showed Obama tied with any generic Republican candidate among registered voters, with 45 percent likely to back the incumbent Democrat and 45 percent saying they would support "the Republican party's candidate."
Sputtering economy or not, senior Republicans say Obama could win re-election. Karl Rove, a Republican strategist considered a major force behind George W. Bush's two presidential election victories, was quoted this week as saying Obama should still be considered the favorite.
Incumbents typically have a strong advantage in presidential races.
"The unemployment rate is important, but it is not the only factor that will determine the 2012 elections," said Allan Lichtman, a political historian from American University.
"Other factors include major success or failure abroad, avoidance of scandal, an uncontested nomination, the lack of a third party contender, Obama's charisma and the lack thereof of the GOP contenders."
(Editing by Alistair Bell and Todd Eastham