And the world has soured on President Joe Biden despite it all. Tuesday’s midterm elections could stymie the Democratic president with a Republican-controlled Congress, and polls and public opinion polls suggest a gloomy mood around economic issues is pushing voters in that direction. It is a fact of American politics that the party in the White House competes in the congressional races held every two years between presidential contests. It’s a fact right now that there’s a roaring, real-time mismatch between the president’s 40% approval rating and broader economic conditions that are mixed at worst — with high inflation the focus for many, but also one of the strongest labor markets in decades and an unemployment rate of 3.7%. Overall, the economy is expected to grow in 2022, albeit slowly, after concerns earlier in the year that it had begun to contract. However, 56% of respondents to a recent Morning Consult poll gave the economy a failing grade and a consumer confidence index “has been lower in recent weeks than during the 2020 COVID-19 lockdown.” A CNN poll said a strong majority feel the country is in recession, though by almost any standard it is not. It’s a frustrating time for Democrats, who have won many battles that have provided financial help to people, including a recent package of student debt relief, as well as broader investment in infrastructure and regional industry. “The American people are starting to see the benefits of an economy that works for them,” Biden said in a speech in New Mexico last week, trying to balance perceptions of where things stand. He was speaking at a time, however, when anxiety about what lies ahead seems palpable with inflation so high it has offset wage gains for much of the Federal Reserve’s even tighter monetary policy, losses in the stock and housing markets and a real risk, according to many economists, that the recession will start next year. Reuters Graphics
WHO IS TO BLAME?
Republicans have made the economy their No. 1 issue and accuse Biden and Democrats of fueling inflation with big spending packages and then ignoring the financial plight of American families facing soaring energy and food prices. “President Biden is desperate to change the subject from inflation, crime and open borders,” Senate Republican leader Mitch McConnell tweeted last week after Biden gave a speech on the threats to democracy of the US if some Republican candidates refuse to accept electoral defeats. . “Ask how they’ve affected your family over the past two years, then get out and vote!” There is more than a little debate about why prices are rising so quickly, more than 8% annually since September. Between former President Donald Trump and Biden, about $5 trillion in pandemic aid has been pumped into the U.S. economy since March 2020 — one of the reasons the bank accounts are still intact. While that money continues to fuel demand, economists generally attribute much of the recent rise in prices to external supply shocks. The causes of inflation, however, may not matter much to voters who consistently punish politicians for price hikes on daily necessities, particularly food and gas. Food prices rose at an annual rate of 11% through September, the fastest monthly rate since February 1979, when Jimmy Carter was in the White House. After hitting $5 a gallon last summer, the national average price of unleaded gasoline had fallen to $3.70 last week — but it’s still well above the $2.53 motorists paid the week before Biden’s inauguration in January 2021. Still, key parts of the economy are doing as well as ever. The unemployment rate has averaged 3.6% since March — better than before the 2018 midterm elections under Trump, and truly unmatched since the midterm elections of 1966. Until recently, wages for low-wage workers have been rising faster than inflation, and if anything, the Biden presidency has been a period of perhaps unrivaled worker leverage, characterized by job growth and openings far outnumbering job seekers. Reuters Graphics
BEHAVIORING DIFFERENTLY? not yet
What has also been tumultuous, reflecting the United States’ complex response to the pandemic and a host of other dilemmas — a “polycrisis,” as some academics call it, that includes the outbreak of war in Europe and the ongoing one in China. zero-covid lockdown. Biden’s approval ratings have been high early in his term, with stimulus checks still in place and child tax credits and unemployment benefits helping many families. All this is in the past. Small businesses, for example, were among the main beneficiaries of government spending during the pandemic, but now favor Republican control of Congress, even though only a third identify as members of the party, according to a recent poll by the small business group Alignable; members of. Among their top concerns, more than half cited the rising cost of credit, pushed higher by the U.S. central bank in a dynamic that also harks back to the presidency of Carter, an inflationary incumbent who lost re-election under a regime in which interest rates were climbing sharply. According to a recent Reuters-Ipsos poll, people are not yet changing their daily lifestyles much in response to inflation or the Fed, which has raised interest rates by 3.75 percentage points this year. One of the benefits of the large pile of cash preserved by the pandemic is that people can continue to spend despite higher prices. 80% of respondents to that poll answered “none of the above”. But a third of Democrats and Republicans said they had delayed a “home, office or other purchase” because of higher interest rates — decisions that can sting as families plan for years to come. The average interest rate on a 30-year mortgage recently hit 7% for the first time in 20 years, a shock to younger, first-time homebuyers in particular. Reuters Graphics Reuters Graphics
‘LIGHTS RED’
Perhaps just as important for politics, there is a lot of uncertainty about the future, which appears to be behind the dip in surveys that gauge consumer confidence. Confidence has fallen despite a general increase in wealth. Since the start of the pandemic, including Trump’s last year in office and Biden’s first two, households have added $32 trillion to their wealth, an increase of about 30%, according to Fed data. The holdings of the bottom 50% more than doubled. However, in the last year growth has stalled, and ahead of Tuesday’s election there appears to be little optimism. In the Reuters-Ipsos poll, a strong majority that included 70 percent of Democrats and 77 percent of Republicans said they were either no better or worse off economically than a year ago. The gap between public attitudes about the economy and the facts on the ground “is very wide,” said John Leer, chief economist at Morning Consult. But “there’s also a big disconnect in the underlying data. We’re getting strong job growth. GDP growth. But everything is flashing red.” Reporting by Howard Schneider Additional reporting by David Morgan. Editing by Dan Burns and Paul Simao Our Standards: The Thomson Reuters Trust Principles. Howard Snyder Thomson Reuters He covers the Federal Reserve, monetary policy and the economy, a graduate of the University of Maryland and Johns Hopkins University with previous experience as a foreign correspondent, financial reporter and on the local staff of the Washington Post.
