Science

Experts see a “resilient” US economy. Voters are not buying it.

with only a few days mid term electionReading up on the US economy can be elusive: The country remains one step ahead of recession and the labor market is surprisingly strong, with most workers currently seeking jobs.

Yet inflation remains at a 40-year high, buoying many voters, some of whom say they have had to cut back on basic spending to pay for their expenses. energy bill, Major housing market is also weakening Mortgage costs are rising As the Federal Reserve raises interest rates to suppress inflation.

Asked to summarize the US economy in one word, economists interviewed by CBS Moneywatch described it as “fragile” and “cooling”, yet also “resilient”.

Some voters may use more descriptive terms as they go to vote on November 8. Sue Lee, an 80-year-old retiree in Crestwood, Kentucky, said this election is the first time she will directly vote Republican on the ballot as she blames Democrats for rising propane and gas bills, which have cost her her dental insurance and home warranties. forced to cancel.

“I’m getting down to the point, what do I cancel next? I can’t cancel my taxes because I’ll lose my house,” said Lee, whose propane heating costs have gone up from $120 to $175 a month. The one who is motivating him should turn off his furnace at night.

it’s still the economy

It’s been 30 years since James Carville’s cryptic explanation inspired voters: “It’s the economy, idiot.” And the surveys underscore deep public pessimism about the state of the economy, with 70% of Americans saying the economy is either “very bad” or “very bad.” according For over 2,000 registered voters Voting in mid-October By CBS News/YouGov Battleground Tracker.

To be sure, the job market remains strong, businesses are still hiring and many Americans continue to job-hop in search of better pay and working conditions. But voters who prioritize the economy – and whose mood has worsened after months of high inflation – will potentially lean Towards the Republican candidates on Tuesday, according to CBS News polling.


Mortgage rates fall for the first time ever as the Fed announces interest rate hikes

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Economists are less negative than voters, though they point out that the US faces a range of economic constraints, from ongoing high rates of inflation to slowing corporate profits – risks that many experts feel are Maybe Head to recession in 2023,

Despite those problems, the economy is currently “still making progress,” said Greg Dako, chief economist at consulting firm EY Parthenon.

“This is an economy where businesses are still investing and hiring, where consumers are still spending, but where all this activity is being done with a lot of discretion,” Dako said.

Indeed, recent economic data suggests a recession is not imminent. economy grew at the rate of one 2.6% annual rate from July to September. It marked a strong rebound after the country’s GDP shrank in the first two quarters of the year, and eased concerns that the US was on the verge of recession.

But despite the strong GDP headline numbers, there were signs that consumers were reeling under the brunt of high inflation. Final Sales to Home Buyers — A Remedy how much are americans buying – grew only 0.1% on an annualized basis – the worst performance since the pandemic hit in the second quarter of 2020 and a worrying metric given that consumer spending accounts for nearly two-thirds of economic activity.

“Nobody has a magic wand”

Jackie Trapp, 57, in Muskego, Wisconsin, who left the workforce a decade ago to care for her parents and who relied on a Social Security disability and a small pension for most of her income, said she and her husband There are cuts back on expenses to offset the effects of inflation.

“Do we need cable? No, we don’t. Do I need that $5 Starbucks? No, we don’t,” Trapp said. “If we get tacos from the taco truck, I love them just as much as that lovely diner we used to go to.”

Despite the financial pinch, Trapp said she plans to vote for Democrats, which she describes as the party’s support for voting rights and Social Security. Trapp has a rare blood cancer that cost him nearly $22,000 last year to treat, even with the majority of Medicare’s bill. She said she expects to see those costs drop in the coming years in the form of drug-pricing provisions. inflation reduction act kick in.

Wisconsin Republican Sen. Ron Johnson has suggested to be transformed Social Security in a discretionary program that must be renewed every year by Congress. It would politicize money for a program that supports nearly 70 million Americans — mostly retirees, but survivors of disabled workers and Social Security beneficiaries — many of whom have been hit hard by inflation this year because 2022 cost-of-living adjustment Couldn’t keep pace with the sharp jump in prices.

“In my home state, Senator Johnson is openly talking about abolishing Social Security and Medicare, and he is ahead,” Trapp said. “Inflation is all over the world, and no one has a magic wand.”

slip back

It’s not just retirees who are falling behind – many of America’s 164 million workers have slipped backwards despite a boom in wages during the pandemic. Although wages rose 5% in the third quarter, inflation remained above 8% during the same period. This is forcing some consumers tap into their savings To cover the expenses, said John Leer, chief economist at Morning Consult.

“Now you are in a world where wages are not keeping pace with inflation. They have to reduce savings, rely on credit,” he said. “Savings are dwindling, but the job market is strong. That’s the duality right now.”

Still, economists expect a reduction in inflation. Six interest rate hikes This year by the Federal Reserve, though not on time for the medium term. Consumers may not get relief for several months, with EY Parthenon’s Dako predicting that inflation is unlikely to start declining until the second quarter of 2023.

Still kicking in, but for how long?

Economists say that if there is one bright spot in the US economy, it is the country’s employment sector.

“Going to the election, the labor market is going to Joe Biden,” said Julia Pollack, chief economist at ZipRecruiter.

President Biden is referring to the strength of the job market before the midterm, pointing out that 10 million jobs have been created since his inauguration in January 2021. Layoffs are also short lived, a trend which Morning Consult’s Lear has called “labor hoarding”.

“Businesses are holding on to workers even if they don’t need them or if they think there will be a recession,” Leer said.

That’s because the tight labor market during the pandemic has made it harder to find workers, with business leaders shying away from firing people. According to Pollack, companies are laying off a third fewer employees each month than before the pandemic.

Still, there are signs that the labor market is slowdown in some areassuch as technology and finance.

“That’s where you’ve got freeze hiring, where you’ve got layoffs, where you’ve got big banking CEOs talking about hurricanes and hurricanes in all kinds of dramatic language,” she said. “The main road is still fine.”

power of perception

Dako said that if the economy falls into a recession, unemployment is likely to rise, though perhaps not as much as it was in the previous recession. For its part, the Fed is forecasting a significantly higher unemployment rate in 2023, expecting it to rise from 3.5% to 4.4% next year – a number that means Loss of around 1.2 million jobs,

Whatever the economic data shows, some polls show that many Americans already believe the US is in recession. In contrast to what the organization officially calls a recession, the National Bureau of Economic Research has made no such announcement.

What is clear, however, is that the combination of high inflation and the perception that the US is in a tizzy could influence voters’ behavior, economists say.

“People really don’t like inflation, especially women,” Pollock said. “Women experience inflation more eagerly and when prices are higher they feel more negative about the way the economy is going because they buy groceries, and they feel inflation more regularly.”

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