Cool inflation, low unemployment, robust economic growth and… low turnout.
Despite indicators that show the U.S. economy is moving in a healthy direction, many Americans remain pessimistic about business and job prospects — a mood that poses a frustrating problem for Vice President Kamala Harris in her battle with Donald Trump for the White House.
Less than a month before November’s presidential election, the US economy added about 100,000 more jobs than expected in September, saw wages rise further and inflation came within striking distance of the 2% target policy makers.
But nearly half of respondents to a New York Times/Siena College poll released Tuesday rated current economic conditions as “poor.”
Poll after poll has also found that the economy — especially inflation — is by far voters’ top concern.
While Harris has narrowed Trump’s lead, polls show voters favor the former president on economic issues.
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Economists point to a cumulative rise in post-pandemic costs, still-high home prices and uneven job gains as explaining an apparent disconnect between the data and voter sentiment.
“While they know inflation has slowed, (consumers) remain frustrated by high prices,” said Joanne Hsu of the University of Michigan.
For policymakers, “the low-hanging fruit is trying to target prices that people see on a daily basis,” said economist Ryan Sweet of Oxford Economics, referring to food and natural gas.
“This election cycle just highlights that inflation is extremely unpopular,” he added.
Price shock
“In recent years, consumers have gone through a period of very large price increases,” Sweet told AFP.
“You’d have to go back to the 1970s and 1980s to see the last time the US economy had inflation this high.”
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Inflation rose to over 14 percent in 1980.
Consumers again saw price increases jump to a painful 9.1% in mid-2022.
“For many voters, this is the first time they’ve experienced (such) inflation,” Sweet said.
While the Consumer Price Index (CPI) fell to 2.5% in August, Sweet said “it’s the price level that matters to the consumer” and not the inflation numbers.
The CPI for food has increased by 26% since February 2020 during the pandemic, he noted.
The cost of natural gas has also risen, while that of new and used vehicles is about 20% above 2020 levels.
Fewer savings
Trump seems to be tapping into such sentiment.
“Inflation has destroyed our economy,” he told reporters last week.
Trump also linked last week’s dock workers’ strike to inflation, saying it had hit workers hard.
On Sunday, he charged that “inflation will skyrocket” if Harris takes office and promised to “make America affordable again.”
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“Just seeing prices rise steadily over time weighs on the collective psyche, particularly for low- and middle-income households,” Sweet said.
The voter gloom comes despite the Congressional Budget Office finding in May that purchasing power increased across groups as incomes rose faster than prices between 2019 and 2023.
It may be true that wages are rising faster than inflation in general, Hsu said, “but that’s not necessarily the case for an individual.”
And it’s hard to shake off the memories of the pandemic, said Nationwide Chief Economist Kathy Bostancic.
“In those years where income went down, household income, consumers relied more on credit cards or dipped more into their savings,” Bostjancic added.
That means higher credit card bills and more delinquency, especially among low-income or younger people, adding to pressures like student loans, he added.
The savings rate before the pandemic was over seven percent, but currently stands at around five percent.
Abnormal hiring
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The overall hiring numbers also cover wide variations across industries, said ZipRecruiter Chief Economist Julia Pollak.
Job growth has been concentrated in a few industries, with essentially all of the newly added jobs going to sectors that “account for only 48 percent of employment,” he added.
The other half of U.S. workers have seen “unusually slow growth in their industries,” Pollak said, with hiring slowing outside sectors such as government, health care and leisure and hospitality.
Although workers had 17 months of positive real wage growth, they had experienced a longer period of negative growth in the past.
“There are a lot of workers who still feel their wages have to catch up,” he said.
Source: AFP