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Deep dive into past results shows midterms not a foregone conclusion

Deep dive into past results shows midterms not a foregone conclusion
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Historically, the party in control of the White House has lost a significant amount of House seats during its first midterm. This is common knowledge among students of U.S. politics.

However, what may be much less obvious is the fact that today’s electoral backdrop is extremely unusual compared to the recent past. Indeed, there are only two instances directly comparable to today. Interestingly, the outcome at the time runs counter to today’s conventional wisdom, which is the following:

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The executive branch’s party has lost representatives in 16 out of 18 elections dating back to 1910. The analysis begins here because of the availability of unemployment figures. This provides a way of gauging the health of the economy at the time of the midterm election.

Over the aforementioned period, the administration’s party lost an average of 38 seats. This is well in excess of the 23 seats Democrats need to retake the House. Sometimes, the losses have been staggering.

The largest occurred in 1922 when the Republicans lost 77 house seats under President Warren G. Harding. The second-largest was the 63-seat Democrat loss in 2010 under President Obama. However, there were a few times the declines in House seats were relatively small.

Consider the 1926 (Republican President Calvin Coolidge), 1962 (Democratic President John F. Kennedy), 1970 (Republican President Richard Nixon) and 1990 (Republican President George H.W. Bush) midterms.

The administration’s party lost only nine, four, 12 and eight seats, respectively, over these four periods. This clearly cuts across the historical grain. Perhaps the relatively modest losses were due to a strong labor market.

For example, the unemployment rate was under 2 percent in 1926, and it averaged just 5.5 percent in the other three periods cited. These are historically low unemployment readings. In this regard, today’s labor market is worth highlighting.

The unemployment rate averaged just 3.8 percent last quarter. This is the lowest reading in 50 years. Clearly, this sets today’s backdrop apart from the past, at least in terms of labor market vitality. A low unemployment rate likely helped minimize the loss of party seats in previous midterms.

Yet, another fact is worth mentioning. When a new president takes office, his party almost never has control of the House at the time. In other words, the minority party simply loses more seats at the midterm, thus becoming a smaller minority.

Interestingly, when an incoming administration had control of the House, the party in power actually picked up seats, but this has happened only twice in the last 100 years. This occurred in 1934 (Democratic President Franklin Roosevelt) and in 2002 (Republican President George W. Bush), when nine and eight seats, respectively, were gained.

Of course, there were mitigating factors: The economy was on the mend in 1934 following the Great Depression years of 1929-33, and 2002 was the year after the 9/11 terrorist attacks. These factors benefited incumbency. Then again, unemployment was not anywhere near as low then as it is today. Maybe that is today’s mitigating factor.

In any event, we will know soon enough. Nevertheless, in the meantime, students of political history should couch today’s political and economic backdrop in the extraordinarily unusual position it is.

Joseph LaVorgna is the chief economist for the Americas at Natixis, an international corporate and investment banking, asset management, insurance and financial services arm of Groupe BPCE, the 2nd-largest banking group in France with 31.2 million clients spread over two retail banking networks, Banque Populaire and Caisse d’Epargne.