WASHINGTON, Nov 7 (Reuters) – Household money is at record highs in the United States, and consumers are using it to pack restaurants and planes and buy new cars. The jobs are there for the taking. Net worth is 30% higher than before the pandemic, more so for those in the bottom half.
And people soured on President Joe Biden despite all of this.
Tuesday’s midterm elections could cripple the Democratic president with a Republican-controlled Congress, and opinion polls and public opinion polls suggest a gloomy mood around economic issues is pushing voters into this direction.
It is a fact of American politics that the party in the White House struggles in congressional races held every two years between presidential elections.
It’s a fact right now that there’s a real-time roaring dissonance between the president’s 40% approval rating and broader economic conditions that are mixed at worst – with high inflation leading the way for many. but also one of the strongest job markets in decades and an unemployment rate of 3.7%. Overall, the economy is expected to grow in 2022, albeit slowly, after fears earlier in the year that it had started to contract.
Yet 56% of respondents in a recent Morning Consult poll gave the economy a failing grade, and a consumer confidence index ‘has been lower in recent weeks than it was during lockdown of COVID-19 in 2020″.
A CNN poll said a strong majority believed the country was in a recession, although that was not the case at almost every level.
It’s a frustrating time for Democrats, who have won several marquee battles that have brought economic relief to people, including a recent student debt relief package, as well as broader investments in infrastructure and education. 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 about the current situation.
He was speaking at a time, however, when anxiety about what lies ahead seems tangible due to inflation so high it has offset wage gains for many of the Federal Reserve’s ever-tighter monetary policies, the losses in the stock and real estate markets and a real risk, according to many economists, this recession will set in next year.
WHO TO BLAM?
Republicans have made the economy their No. 1 problem and accuse Biden and Democrats of stoking inflation with big spending programs and then ignoring the economic plight of American families facing soaring housing prices. energy and food.
“President Biden is desperate to change the subject of inflation, crime and open borders,” Senate Republican Leader Mitch McConnell tweeted last week after Biden devoted a speech to the threats to American democracy if some Republican candidates refuse to accept electoral losses. . “Ask how the past two years have affected your family, then get out there and vote!”
There is more than a little debate as to why prices are rising so rapidly, over 8% per year in September. Between former President Donald Trump and Biden, an estimated $5 trillion in pandemic aid has flowed into the US economy since March 2020 – one of the reasons bank accounts are still empty.
While that money is still fueling demand, economists generally attribute much of the recent price spike to external supply shocks.
The causes of inflation, however, may not matter much to voters who have consistently punished politicians for price increases of basic necessities, especially food and gasoline. Food prices were rising at an 11% annual rate starting in September, the fastest monthly pace since February 1979, when Jimmy Carter was in the White House. After hitting $5 a gallon last summer, the average price of unleaded petrol in the country fell to $3.70 last week – but is still significantly higher than the $2.53 paid by motorists the week before Biden’s inauguration in January 2021.
Yet key parts of the economy are doing as well as they ever have.
The unemployment rate has averaged 3.6% since March – better than before the 2018 midterm elections under Trump, and truly unmatched since the 1966 midterm elections. Until recently, wages of the lowest-paid workers were rising faster than inflation, and if anything, Biden’s presidency was a period of perhaps unparalleled worker influence, characterized by job jumps and well-rounded openings. greater than the number of job seekers.
BEHAVIOR DIFFERENTLY? NOT YET
What it has also been is turbulent, reflecting the complicated US response to the pandemic and a host of other dilemmas – a “polycrisis”, as some scholars call it, which includes the outbreak of war in Europe. and China’s still ongoing “zero COVID” lockdown crisis.
Biden’s approval rating was high at the start of his term, with stimulus checks still running, and child tax credits and unemployment benefits helping many families.
It’s from the past.
Small businesses, for example, have been among the biggest beneficiaries of government spending during the pandemic, but now favor Republican control of Congress, even though only a third identify as party members, according to a recent poll by the Alignable small business group. his members.
Among their top concerns, more than half cited the rising cost of credit, pushed higher by the U.S. central bank in a dynamic also reminiscent of Carter’s presidency, an incumbent battling inflation that lost its re-election under a regime in which interest rates rose sharply.
According to a recent Reuters-Ipsos poll, people are not yet changing their daily lifestyle much in response to inflation or the Fed, which raised rates by 3.75 percentage points this year. One of the benefits of the large pool of money retained from the pandemic is that people can continue to spend despite higher prices.
When presented with a list of behavioral changes in response to inflation, ranging from lowering savings rates to canceling vacations or buying cheaper brands, 80% of respondents to this poll responded “none of the above”.
But a third of Democrats and Republicans said they’ve delayed a “home, office or other purchase” because of higher rates – decisions that can sting as families plan for years to come. The average rate on a 30-year fixed mortgage recently hit 7% for the first time in 20 years, a shock to young first-time buyers in particular.
Perhaps as important for politics, there is serious uncertainty about the future, which appears to be behind the fall in surveys assessing consumer confidence.
Confidence has fallen despite the 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.
But for the past year, growth has stalled, and with Tuesday’s election approaching, there appears to be little optimism left.
In the Reuters-Ipsos poll, a strong majority including 70% of Democrats and 77% of Republicans said they were neither better nor worse financially 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
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