Welcome to FiveThirtyEight’s political chat. The text below has been edited slightly.
nrakich (Nathaniel Rakesh, Senior Election Analyst): For a long time, the economy was seen as a major burden for President Biden in his re-election bid. Inflation rose in 2021 and 2022, reaching its peak at… By 9.1 percent last June. same month, Average gas prices It exceeded $5 per gallon. In the second quarter of 2022, the actual GDP It decreased by 0.6 percent. It was no surprise, then, that only 28 percent of Americans approved of the way Biden is handling the economy overall Quinnipiac University July 2022 Poll.
But in recent months, economic indicators have been looking up, and… Biden has begun to raise this issue His economic policies are successful. However, Americans do not appear to be changing their perceptions of his management of the economy. (the Recent Quinnipiac poll He put his approval rating on the economy at 36 percent.) So, for today’s FiveThirtyEight Slack conversation, I want to explore why that is, and whether Biden has any hope of making the economy a winning issue for him in next year’s election.
But first let’s set the scene: What do the indicators now say about the health of the economy?
to improve (Amelia Thompson Defoe, Chief Correspondent): For an economy that has been on the verge of recession for a long time Over a year nowit looks very good! Real wages are Finally a faster rise than inflationlabor market Weaken a little But it is still fairly strong for workers and consumers Still spending At a healthy rate.
Monica Potts (Monica Potts, senior political correspondent): What Amelia said. For starters, the job market is still really strong. Unemployment at 3.8 percentAnd wages are rising. economic inflation, By just over 3 percentFinally, it cools down too. The Fed appears to be succeeding in its aggressive initiative of lowering inflation without causing unemployment to rise.
There are other signs too. For example, the law of reducing inflation Stimulating investment in manufacturingWhich the white house He was more than happy to point out.
to improve: In many ways, it appears the economy is finally returning to its pre-pandemic normal — but with more favorable conditions for workers. “that legendary one”Soft landing“It actually looks like it could happen.
Of course, economists’ recession predictions are extremely unreliable. (This is an old refrain from FiveThirtyEight.) And things can always change — for example, as Monica recently wrote, student loan repayment is about to begin, meaning millions of Americans will have less money to spend when they resume their monthly payments. But the situation is still rosier than Lots of people They were prophesying Even just a few months ago.
com. gelliottmorris (J. Elliott Morris, Managing Editor, Data Analytics): That’s right. Some pessimistic forecasts of the recession were not really reliable, however Aggregate economic forecasts It’s still high compared to what people were saying a year or even six months ago. However, there are some not-so-hot indicators. Mortgage loan and Interest rates They continue to rise, for example, and Personal savings rate It is almost at an all-time low. This is a different dimension of “the economy” than annual wage growth, for example, but it is an important one.
to improve: True, Elliot, and It is not clear The Fed has finished raising interest rates. Much will depend on what inflation data for August 2023 looks like when it is released later this week.
Monica Potts: Yes, I think this points to a really big and persistent problem with asking voters how they feel about “the economy.” What this term means to people can vary a lot. Does that mean how much money they earn, or how much they spend on things like housing and food? Does that mean whether they can afford daycare? There is great variation in how people feel about the economy, and many different ways in which the federal government can influence these matters.
to improve: Another question is whether consumer spending will start to decline – which as humans was a possibility Spend down Their pandemic savings. But overall, there are other signs that Americans feel good about their finances. For example, A Latest Ipsos poll It found that the share of Americans who say they have enough money to cover unplanned expenses (54 percent) is higher than it was this time last year (40 percent). Fewer people also say that after paying their bills, they don’t have enough money to spend on the things they want.
Nrakesh: However, despite this, Biden is having difficulty convincing voters that the “pedium economy” works. Why?
Monica Potts: To start at the beginning, Biden inherited a truly bizarre economy. Coronavirus lockdowns caused a sharp and dramatic recession, but then the economy began to recover. But people’s behavior has changed too. More people were working from home and commuting, had money to spend and supply chains were slow to restart. Thus, Americans have generally been feeling nervous about the economy since he took office.
The recovery has been affected by very high inflation, as you noted at the beginning, Nathaniel, and a lot of what the Biden administration has done in terms of economic policy is the kind of slow, behind-the-scenes policy making that voters don’t do. Don’t really notice. Although inflation has slowed, prices are still much higher than before the pandemic; Borrowers are still seeing much higher interest rates; etc. So I think the biggest reason is that Americans are generally dissatisfied with the new normal in which we find ourselves.
Guillottorius: I think that last point is a really good point, Monica. Percentage of people who tell pollsters that The broader economic situation is weak It is still at its highest levels since 2018. At first, it seems difficult to reconcile this with the rosy economic indicators we talked about. But I think it’s possible that people have long-term memories of economic growth and remember a time when prices were significantly lower.
A lot of the discussion on this topic is related to tracking the annual change in the CPI or the labor market or what have you. But if you take a longer view, for many families, things are now permanently more expensive. And even if their wages go up, I doubt they enjoy spending 15% more at the grocery store than they did before the pandemic. It will take some time for those memories to fade.
Of course, this is just my theory.
to improve: I mean some people think the economy is getting better. Civiqs tracking survey It shows that Democrats, in particular, are more likely to say the current state of the economy is fairly good or very good (63%) than they were a year ago (53%). But that’s not quite the question you’re asking, Nathaniel — it’s not just whether people think the economy is getting better, it’s whether people see improvement and say, “Yes, Biden is making that happen!” There, Biden does not seem to be getting much support. According to A A recent Wall Street Journal pollFor example, the share of registered voters who say they approve of the way Biden is handling the economy has not changed appreciably since April.
Which amounts to my theory about what’s going on. I’m not sure voters will give Biden credit for the improved economy, especially since the increase in inflation occurred under his watch. It’s not like he can come and say, “Look at this mess my predecessor left me.”
but! This does not mean that this turn of events is not in his favor, because the alternative – a deteriorating economy – could really harm him.
Nrakesh: Interesting, Amelia. Do you think the smell of the bad economy that was there a year or two ago is a permanent smell for Biden? And he can never wash it, even if he fixes it?
to improve: I don’t know about permanentBut as Elliott said, prices are still higher. Americans are increasingly convinced that these high prices are here to stay. So the fact that people are starting to get used to those higher prices and say the economy is improving could be an indication that Biden is dodging a bullet. So it depends on how you frame it. On the one hand, people don’t give Biden credit, which is unfortunate for him. But on the other hand, it’s looking increasingly like we might have a normal economy heading into 2024, which you can consider a big win given the amount of economic volatility we’ve seen since the pandemic began.
Monica Potts: I don’t think prices will go down, but it’s also possible that people will get used to it. So they could hurt Biden less, Amelia said. This leaves room for other issues that voters care about to become more important.
Nrakesh: But the question is: How important is achieving this victory from a political standpoint? Historically, what is the correlation between the health of the economy and the chances of a presidential reelection?
to improve: Would Biden like to see “penetration economics” appear in high school history textbooks? certainly. But what he really wants is to win re-election, and that is unlikely to happen if people think the economy is getting worse.
Guillotmores: Historically, we know that actual economic conditions correlate well with presidential election results. If the state of the economy is broadly positive compared to a year or two ago, the incumbent party tends to get a boost. Of course, economic indicators do not fully predict election results, but they have a residual effect.
The good news for Biden on this front is twofold: First, voters tend to start making these retrospective assessments closer to the election. The second is that they are Look just a few years in the past. This means there is time for things to get better for him, and for him to be rewarded.
But the bad news for Biden is that there is still time until the tables turn against him!