It’s the Economy, Stupid! Or is it?
Are you better off than you were 4 years ago? (American Version)
There are, at the time that I’m writing this, a little over 5 months to go until the 2024 US election. Does that seem sooner than you thought? Does it sound better if I say 24 weeks? No? How about 168 days? Play with the numbers all you want, it’s just around the corner, and if you aren’t suffering from politics induced form of Stockholm syndrome (i.e. you always vote the same way), you’re going to want to answer that crucial question “am I better off than I was 4 years ago?
To many this is a simple question…plus I have to actually go into the office now. However, there is a danger that our memories are tainted by nostalgia. That may seem hard to imagine. What was happening in 2020 that could make you feel this way unless you’re a hyper-introverted shut-in. Oh, take me back to the glory days of COVID lockdowns! To prevent decisions based on “the fog of memory” we need to look at the data to answer that question. Of course, “better off” is subjective and each of us will make that judgement based on the issues that we feel are the most important. While it is impossible to write an article answering the question for each of us, we are fortunate that pollsters have given us insight into the most important issue of the “Average Joe” (Joe and Jane Sixpack, Lunchbucket Joe, Ordinary Jane, pick your favorite moniker).
Statista gives us this as the top 10 issues.
Immigration looks to have a clear lead, but this is somewhat deceptive as there are a number of economic issues that could be rolled up into one topic. The “Economy in general,” “High cost of living/Inflation,” and “Poverty/Hunger/Homelessness” combine for 31% and there are a number of other related issues not in the top 10 which would push this number higher. Gallup has done a better job of categorizing the issues into “economic” and “non-economic” issues (although oddly they have “Poverty/Hunger/Homelessness” in the “non-economic” category. It’s complicated I guess).
There’s always a balance between too many and too few categories but I’m going to assume that if fewer than 10% of those polled mentioned an issue as the most important problem, it’s not going to …and we can “safely” ignore it. That leaves us with:
Economic Problems at 36%
Immigration at 27%
The government/Poor leadership 18%
Economic Problems
While the “Economy in general” is the number one issue under “Economic Problems,” its difficult to assess. Is it the stock market? Inflation? Unemployment? Inequality? It’s all of these things and the reason why it was separated from the “non-economic problems” in the first place. No single measure can measure the economy, but GDP growth and unemployment together may come close as they provide an overview of how the economy has performed at a high level and provide a measure of citizen participation, so let’s start there before examining the only economic problem to “score” more than 10%, the “High cost of living/inflation.”
Compared with other advanced economies the US has done well over the last few years, outperforming every other country.
However, while “keeping up with the Joneses” might matter when you’re doing well, the foundation for most people is “how am I doing?” The answer, at least from a real GDP standpoint, is that after the rough years of COVID, the US has done well returning to a growth rate in line with that seen from 2009 and 2019.
If the economy is growing again, how is this affecting that average voter? The US unemployment rate in April 2024 was 3.9%, 0.1% higher than it was in August of 2023. The graph below shows that unemployment, like GDP has returned to “normal” levels and while the “Monthly Growth in Total Nonfarm” jobs looks solid, it’s important to remember that over 20M jobs were lost in April of 2020 so a lot of this is likely recovery rather than long-term growth.
There’s one other stat to remember when looking at employment and that is the participation rate, “the proportion of the population either looking for a job or already holding a job.” Perhaps unsurprisingly, this stat appears to be returning to normal as well.
GDP, employment, and the participation rate all look good, or at least appear to be returning to normal and yet so many people view the economy as a major issue and I suspect it’s due to our final economic problem, the “High cost of living/inflation.”
By QueensanditsCrazy - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=145324789
A quick glance is likely all anyone needs to see that inflation has been unusually high in recent years. In fact, you have to go back to the early 1980s to see levels similar to what we’ve seen over the last few years. The administration is quick to point out that inflation appears to be returning to normal having hit 3.4% in May, only slightly higher than the targeted rate of 2% to 3%. While a return to normal would-be great news, it ignores the impact that 3 years of high inflation has had on prices – it may sound obvious, but I feel obliged to point it out, inflation dropping to normal levels does not mean prices will return to pre-COVID levels. Here is the inflation rate in each of the last 3 years:
1.2% in 2020
4.7% in 2021
8.0% in 2022
4.1% in 2023
Cumulatively this mean prices have risen over 19% since the last election (excluding 2024). Breaking down the big three tells an even worse story:
Rent is 31.4% higher than before the pandemic.
Between January 2020 and January 2024 grocery prices rose 25.4%.
The price of gas rose 27.4% between January 2020 and January 2024
How wages have kept pace with inflation is more complicated as the chart below shows and is likely further complicated depending on the industry one wishes to delve into.
The Verdict – Most Americans have jobs, and the economy is growing and largely returning to normal after the COVID years, but inflation is taking its toll. In the end, it may not matter what the high-level numbers say if your rent and grocery prices have dramatically increased you’re likely to see the economy as worse than it was 4 years ago. In the end you’ll have to make this call for yourself. As for me, if inflation isn’t under control, then the economy is broken.
Immigration
It’s difficult to say which is a worse idea, an open border policy or a closed one. Open borders would overwhelm infrastructure and break the social safety net. As the US fertility rate is below the replacement rate, a close border policy slowly does the same thing as it deprives the US economy of the workers necessary to keep entitlements funded. In short, the US needs immigration, but it needs a wise and controlled immigration policy which at the moment it appears to lack.
How do we know that the current policy is a failure? We needn’t look at the immigration charts, the illegal immigration numbers, or even the stories of the Federal government battling Texas over how (if?) immigration should be controlled on US border between Texas and Mexico. All we need to know is that both Republicans and Democrats think the government is doing a bad job.
The Verdict – What was once seen as a problem by Republicans is now viewed by the majority of Americans as a problem or worse. When even mayors of sanctuary cities are beginning to “sour on illegal immigrants” you know the situation has worsened since the last election.
The Government/Poor Leadership
How do we measure leadership or government effectiveness? Consumer confidence might be one approach. If so, the numbers don’t paint a good picture as consumer sentiment, while rising, has yet to return to the levels it saw during the Trump administration.
Perhaps presidential approval ratings are a good measure. Biden’s are not good.
But then again, neither were Trump’s.
And we can’t even rely on the tried-and-true advice that “it’s better the devil you know than the devil you don’t” as we know both these devils. In the end what is an election but the ultimate verdict on presidential leadership? In this case it will be a pick your poison situation.
The Verdict – It’s a hung jury. Voters dislike both presidents but are unlikely to vote for RFK Jr.
Conclusion
The data seems to point to a bad economy (or at least the perception of one), mishandled immigration policy, and leadership that is unlikely to get better regardless of who wins. Who would I vote for? As a Canadian it’s a decision I thankfully don’t have to make. That said, inflation and immigration would be two of my biggest issues and I don’t see either getting better under Biden who appears to slowly be ceding control of his administration to the progressive wing of his party, which if recent history is any indication, would be disastrous for the country and possibly the world.
Interesting question on what ultimately drives a voter’s decision. In the past, it likely boils down to how a voter feels about their economic situation and a sense of the candidates’ economic vision/policies going forward. Observing the last two elections, I suggest that votes will be more influenced by concerns over the direction of the country. Those swayed by conspiracy theories and fears over a deep state will vote for Trump. Those worried by retraction of women’s right to choose, biased Supreme Courts, the erosion of the constitution, and religious views creeping into their freedoms, will vote for Biden.
if abortion was at the top of the list, things would change in a positive direction....this is like trying to lose weight by focusing on calorie counting, instead of what you are eating.....if you eat lies you will have an immigration problem forever....you have lost the plot! added value is created when you create something from nothing, from an idea...which helps solve problems. if you start making problems to solve them then you are subtracting the value. Abortion is one step in the direction of creating problems in society: a society that can not cope with tough choices. if you start killing one cell by one of your body...immigration will take over the place you did not care to protect, i do not have to remind of 60 mio children killed every year in the world.....so why not reduce the number of 25-45y olds? elderly? to fix the retirement system gap. when life is commodity....thats called slavery! and that is much bigger issue then immigration