WASHINGTON – The state of the US economy is a major factor in the results of any election. But as the 2024 campaign cycle begins, there are more questions than concrete answers about what this means for President Joe Biden’s re-election chances.
Is the economy “good” or “bad”? Is it getting “better” or “worse”? It depends who you ask and of course whether the name contains a “D” or an “R”. The data paints a complicated picture – one that seems more about where people think the economy is going than where it is at the moment.
In the broadest sense: “Is the economy growing or shrinking”? – The news is actually pretty good. Despite all the concerns about an impending recession, the gross domestic product data looks positive.
Measuring economic health in the pandemic and post-pandemic world has been difficult. The early days of the Biden administration were characterized by rapid, even extreme, growth and a yo-yo pattern in numbers as Covid vaccines and variants disrupted work schedules and office processes.
Extraordinary growth of 6.3% and 7% in the first two quarters of 2021 gave way to slumps in the first two quarters of 2022.
Since then, however, the numbers have looked a little more stable and are in the range of normal values. GDP grew by 3.2% in the third quarter of 2022 and by 2.6% in the fourth quarter. The first numbers for the first quarter of 2023 show a slowdown in growth to 1.1%, but that’s still growth.
And the Federal Reserve is targeting slower growth – remember all the rate hikes? – hoping to prevent the economy from overheating and bring about a “soft landing”. The data suggests they might succeed, especially when looking at the economy from other angles.
Think about unemployment. For many people, the question of whether the economy is good or bad boils down to one question: are there jobs for those who want to work? And the answer right now is unequivocally yes.
The unemployment rate was 3.4% in April. This, along with January, is the lowest rate in more than 50 years. And the unemployment rate among African Americans is an all-time low at 4.7%.
Black unemployment has historically and consistently been higher than the overall unemployment rate, and it still is. But in April the gap was only 1.3 percentage points. That’s down from even the summer of 2019, when African American unemployment hit its all-time pre-pandemic low of 5.3%.
In short: the unemployment figures are more than solid; They’re strong — and they certainly don’t point to an economy sliding into recession.
Of course, the biggest shadow over the Biden administration’s economy was inflation. Conversations with constituents are typically peppered with comments about higher monthly bills for goods from groceries to cars.
The latest data suggests that inflation is still a problem, albeit a declining one.
When Biden took office and the economy was still largely frozen, inflation was barely noticeable at 1.4%. In the second half of 2021, as the economy picked up, the rate quickly started to climb to 5% – and it continued to rise with government spending, over 6% and 7% and even 8%. Inflation finally peaked at 9.1% last June.
But since then it has steadily declined. April’s reading of 4.9% was the lowest since April 2021. That’s still not good news for consumers who feel they’re paying too much, but it does suggest Washington is tackling the problem in the US got a grip – at least to some extent.
What do all these numbers mean for voters? That’s not entirely clear. A large part of the economy is psychological – what voters think about all the elements in it – and that gets complicated quickly.
“Consumer Confidence” measured on conference committee shows a mixed picture.
Overall, consumer confidence fell slightly to 101.3 in April from 104 in March. The base number for the index is 100.
However, when consumers were asked to rate the current state of the economy, April’s reading rose from March’s, rising to 151.1 from 148.9. That said, consumers assessed the economy better in April than in March.
So what caused the total to drop? Where consumers believe the economy is developing. The “expectations index,” which measures where consumers think the economy will be in six months, fell to 68.1 in April, down from 74 in March.
The number of expectations is important for several reasons. First, a reading below 80 traditionally means a recession is likely next year. Second, it’s been below 80 every month since February 2022 (except for a momentary sunnier outlook in December) – and the US is yet to experience a recession.
In other words, it seems that a lot of the pessimism about the economy is based on what people expect, what it will do, which nobody really knows.
There is, of course, cause for concern, starting with the great uncertainty hanging over the debt ceiling fight. But consumer “expectations” are always a bit of a guessing game, and that’s doubly true in the current strange economic environment.
And as far as politics goes, one more thing to add to the math is that the 2024 election is over 17 months away. At some point we will find out whether these consumer concerns about the future will materialize or disappear. For now, however, many of the key economic numbers are painting a mixed picture at worst. And at best it looks quite positive.