Kamala Harris and the Surprising Resilience of the U.S. Economy
The United States was supposed to go into recession. And when the Fed started cranking up interest rates at a speed that would leave your grandma spinning in her rocking chair, not many economists had the guts to bet on the economy going gangbusters. I mean, it’s like expecting a cat to swim: not gonna happen. But guess what? Here we are! Inflation-adjusted quarterly growth has been averaging 2.9% this year, which is better than the weather in London!
Mark your calendars, though; on October 30, we’ll finally get the GDP figure for the third quarter. Word on the street—well, more like inside the financial libraries—is that the economy might have expanded at a sizzling 3.3%. That’s nearly double what the soothsayers predicted back in July. Surprise, surprise, just before Christmas! It’s like finding out that fruitcake can actually taste good; who knew?
Good News for Kamala Harris
And let’s not forget about our Vice President, Kamala Harris. It seems like the economic gods are throwing her a bone. As inflation eases up, regular folks might start to feel a tad happier about their wallets. It’s like everyone’s been at a horrible party, and suddenly the DJ drops a banger. They might not be ready to vote for her over Trump—who somehow redeems himself financially in voters’ eyes—I mean, what is this, a bailout? But hey, a strong economy is like a nice cocktail before the big election bash!
Digging Into the Details
Now, GDP may sound about as thrilling as watching paint dry—it’s broad and abstract. But it ties into stuff voters understand: cash, prices, and how many avocado toasts you can buy. The Economist has peeked into its crystal ball and given us five vital economic indicators that could dictate the upcoming election: real income, real consumption, unemployment, inflation, and consumer sentiment. And guess what? They’re all giving Kamala a thumbs-up!
Rock Solid Personal Income
Let’s kick things off with personal income. After-tax income per person has seen a real-term hike of about 2.6%. That’s as exciting as a surprise party—but without the embarrassing karaoke. A quick reality check shows that instead of the once bleak projection of $51,000, we’re now sitting pretty at over $52,000. Thank you, economy; we’ll take that!
Spending Spree
Now, what’s that doing for spending? Well, with incomes looking up, Americans are digging back into their wallets. After an inflation-infused dry spell, consumption has jumped 2.8% in the past six months—the fastest rise in two years, signifying a nice bounce back. It seems we’ve traded in our sad faces for shopping bags once again!
Labor Market and Inflation Under Control
What’s powering all this? A solid labour market and a cooling off of inflation. Who would’ve thought? The unemployment rate has been on a diet, dropping to 4.1% in September, while the labor participation rate is being a real overachiever, nearing 84%. Meanwhile, inflation is waning—close to the Fed’s target of 2%. It’s like watching your wild teenage son finally leave home for college. Peace at last!
The Misery Index and Consumer Sentiment
The misery index, combining unemployment and inflation data, has plummeted to 6.5%, its lowest since early 2020. Now, that’s a reason to pop the champagne! But the big question is, are people actually noticing? Well, recent sentiment surveys remain gloomier than a Monday morning, despite the improving numbers. Even with the economy shining brighter than a new penny, some folks appear to be painting it grey!
But wait! A shift in polling methods can explain some of that decline. A new study suggests if they’d kept the old phone method, the sentiment index would be more chipper. And get this: an alternative measure based on social media posts has shown optimism trending upward. It turns out that people are feeling more cheerful than they’re letting on. Shocking, right? Usually, it’s just cat videos and memes!
Conclusion: The Road Ahead for Harris
So, if Trump proves victorious on November 5, it’ll be like winning a game of Monopoly and finding out you’re still broke. Harris’s economic tailwinds could very well give her the momentum she needs, despite what the sentiment surveys suggest.
In the end, it’s clear that the economy is like a rollercoaster: full of ups and downs, but if you hold on tight, you might just survive the ride. Let’s see how this plays out; it seems the stakes have never been higher… all aboard!
The United States was poised for a recession. When the Federal Reserve initiated the most rapid interest rate hikes since the early 1980s, the landscape of the economy appeared grim leading into an unfolding presidential election. However, recent developments have shifted expectations dramatically. Since the dawn of 2023, the economy has showcased inflation-adjusted quarterly growth that has averaged an impressive 2.9%, notably surpassing its long-term average. On October 30, the U.S. is set to release its GDP figures for the third quarter of the current year, with the Atlanta Fed’s reliable forecast model indicating a likely expansion at an annualized growth rate of 3.3%. This figure is nearly double the median forecast shared at the beginning of the quarter in July.
And things appear to be improving for Kamala Harris. Not only is economic growth resilient; a deceleration in inflation means that the positive effects are being felt more acutely by everyday Americans, manifesting as real growth in their purchasing power. This could explain why consumer sentiment, long marked by discontent with economic conditions, is starting to shift positively. However, it is important to note that this movement alone may not swing voter opinion significantly: many voters still perceive a Trump presidency as potentially more favorable for their financial circumstances. Nonetheless, the robust economy is likely to provide a significant boost for Harris as she navigates the final stretch of her presidential campaign.
Although GDP serves as a broad economic metric and might seem abstract to voters, it is inherently linked to more tangible issues that resonate with them, such as employment and the cost of living. In crafting a predictive model for the upcoming election, The Economist has pinpointed several economic indicators crucial to the electoral outcome. Five indicators, in particular, warrant careful scrutiny as the nation approaches its November 5 vote: real income (adjusted for inflation), real consumption, unemployment, inflation, and consumer sentiment. Recent data from these indicators hover in favorable territory for Harris.
Let’s examine personal income more closely. In real terms, after-tax income per person has experienced a year-on-year growth rate of approximately 2.6% recently. This rate aligns closely with the averages recorded before the pandemic, yet with a notable distinction: last year’s accelerated growth trajectory means that current income levels have outstripped the trajectory established before COVID-19 struck. Just prior to the outbreak, projections from the nonpartisan Congressional Budget Office estimated that real income per person would be around $51,000 today; however, actual figures have surpassed even that forecast, now exceeding $52,000.
Rising incomes have stimulated a resurgence in consumption. In 2022 and 2023, Americans had curtailed spending at retail stores, restaurants, and entertainment venues due to high inflation’s impact on disposable income. As inflation levels have begun to moderate, spending patterns have shifted positively once more. Over the past six months, real consumption has surged by 2.8% compared to the same time last year, marking the highest increase we’ve seen in over two years, indicative of growing confidence in the economy’s health.
For some time, analysts expressed concern that such consumer spending might indicate that Americans were living beyond their means, subsequently accruing concerning levels of credit card debt. However, a significant revision to last month’s income data revealed that the personal savings rate stands at approximately 5%, more than double that documented in early 2022. This indicates that the robust consumer spending is more sustainable than previously believed.
An underlying factor contributing to this economic vitality is a dynamic labor market coupled with a slowdown in inflation. Just weeks ago, following the Federal Reserve’s decision to cut interest rates, apprehension regarding potential weaknesses in the labor market was becoming prevalent. While some uncertainty remains, encouraging data in recent weeks has alleviated these fears. The unemployment rate recorded a decline over two consecutive months, reaching 4.1% in September. Furthermore, employment growth figures have surpassed expectations, while the labor force participation rate among workers aged 25 to 54—the demographic at their career peak—has climbed to nearly 84%, approaching historic highs. Concurrently, inflation, a major source of unease for President Joe Biden regarding his economic management, has continued its downward trend, nearing the Federal Reserve’s target of 2 percent.
The misery index, which combines the unemployment rate with the annual inflation rate, provides a straightforward lens through which to assess the economic impact on everyday citizens. As of September, this index has fallen to an impressive 6.5%, marking its lowest point since early 2020, a time when Donald Trump still occupied the Oval Office.
Are Americans beginning to notice these improvements? One of the most puzzling economic narratives in recent months remains relevant: despite overall economic strength, consumer sentiment has trended towards pessimism. Earlier this year, signs of an upward shift appeared, showcased by a significant rebound in the University of Michigan’s closely monitored survey. Unfortunately, this positive momentum has since waned. The index now stands as a considerable hurdle for Harris.
However, on closer inspection, the situation may not be as dire as it seems. A methodological change in Michigan’s polling approach in April, transitioning from traditional phone interviews to online formats, accounts for the index’s approximately 11% decrease, according to a recent analysis by economists Ryan Cummings and Ernie Tedeschi, who previously advised the Biden administration. Had the previous methodology been maintained, the index would reflect a more stable outlook. Meanwhile, an alternative index measuring economic sentiment, derived from social media activity by Goldman Sachs, is displaying a much more positive trajectory, suggesting a notable increase in consumer optimism over the past six months. This emerging optimism is a hopeful sign for Harris. If Trump is victorious on November 5, it will be despite the favorable state of the economy.
