The Economy at a Turning Point: High Stakes leading up to Election Day
Three years of inflation may be enough to influence voters at the ballot box.
News Analysis
“It’s the economy, stupid!”
This has been the go-to political refrain for both sides since Democrat strategist James Carville uttered it in 1992 when he advised former President Bill Clinton.
With only days now until the presidential election, polls show that the economy is still a top issue for voters.
After nearly four years since the beginning of the current administration, how has the economic landscape performed?
Inflation Is the Top Issue for Voters
The 12-month view of the Consumer Price Index (CPI) indicates that price stability has been restored amid tighter monetary policy and normalizing supply chains.
A more expansive view of inflation’s cumulative three-year run presents a different picture, however, for households.
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The annual inflation rate has slowed to 2.4 percent, the lowest since February 2021. This is considerably down from the June 2022 peak of 9.1 percent, which was the highest in 40 years.
Despite an easing growth rate in the CPI, the post-pandemic inflation bomb reset prices across the marketplace. Cumulatively, headline inflation has soared more than 20 percent over the last few years, though other goods and services have climbed to higher levels.
Food, for example, has advanced nearly 22 percent. Within this category, prices for a wide range of items have soared, such as eggs (166 percent), beef (45 percent), coffee (40 percent), bread (29 percent), and chicken (22 percent),
A whole host of other goods and services have rocketed since January 2021, including gasoline (37 percent), electricity (28 percent), shelter costs (23 percent), and new vehicles (19 percent).
Companies have also endured the brunt of price inflation.
The Producer Price Index (PPI)—a metric of prices paid for goods and services by businesses— has surged approximately 25 percent over the last three-plus years.
Higher prices have harmed household finances, according to one Federal Reserve report.
The Federal Reserve released the results of its eleventh annual Economic Well-Being of U.S. Households report for 2023, finding that high inflation made 65 percent of Americans’ finances worse. About one in six U.S. adults could not pay all of their monthly bills because of inflation, Fed data revealed.
People shop at a home improvement store in New York City, on Aug. 14, 2024. Spencer Platt/Getty Images
Inflationary pressures of the last few years have weighed on other important matters related to personal finances.
An April CNBC-SurveyMonkey poll, for example, found that 53 percent of Americans feel behind on retirement planning and savings. An October survey by Bankrate observed that nearly two-thirds of Americans are behind on their savings.
Various studies have spotlighted just how much inflation has been on Americans’ minds and how inflation anxiety has influenced their views of the country’s economic health.
A March Gallup survey showed that 55 percent of Americans worried “a great deal” about inflation.
Earlier this year, the Pew Research Center found that 62 percent of Americans viewed inflation as one of the country’s top problems. Ipsos reported this past summer that the cost of living is the top concern for the country for 50 percent of adults.
The higher cost of living has made it harder to make ends meet, so polling numbers have reflected the number of Americans who believe the country is in an economic downturn.
In June, an Affirm poll found that 59 percent of Americans think the United States is in a recession, defined as back-to-back quarters of negative GDP growth.
Despite the plethora of recession calls, the U.S. economy has averted one. The third-quarter GDP reading of 2.8 percent represented the sixth consecutive quarter of year-over-year real GDP growth of more than 2.5 percent, the longest streak since 2006.
Some economists call it a “vibecession”—a disparity, in this case, between the actual state of the U.S. economy and the general public’s negative perception of it.
Still, elevated prices have been a chief concern for voters entering the Nov. 5 election. Since the beginning of the primary season, scores of polls have revealed that inflation is the top issue influencing Americans’ vote.
A recent Bankrate survey found that 41 percent of Americans say inflation is their top economic issue for the 2024 election. A September poll from KFF showed that 38 percent of voters selected the economy and inflation as the most crucial issue heading into the ballot box.
While progress has been made to restore price stability, households should not expect prices to return to pre-crisis levels, says Treasury Secretary Janet Yellen
“I don’t expect the level of prices to go down. Some prices will be higher than they were before the pandemic and will stay higher,” Yellen said at a February hearing before the Senate Banking Committee.
During former President Donald Trump’s term, cumulative inflation was 8 percent.
Labor Market: Hot and Cold
The October jobs report may have been a notable surprise days before the election. Last month, the economy created just 12,000 new jobs, short of the market forecast 113,000.
Headline employment figures have been solid over the past few years. After recovering all the lost jobs from the pandemic, the U.S. economy has produced about six million new jobs since June 2022.
The unemployment rate was at or below 4 percent for 17 consecutive months.
A ‘Now Hiring’ sign at a restaurant in Royal Oak, Mich., on Oct. 12, 2024. Madalina Vasiliu/The Epoch Times
Digging deeper into the employment data reveals a more mixed labor market.
The first is the divergence between the household and establishment surveys in the monthly Bureau of Labor Statistics job…
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