According to the Wisdom Financial APP, as the USA presidential election approaches, the American economy is showing a prosperity scene that is rare in modern history on the eve of any presidential election. The unemployment rate has dropped to the lowest point in over twenty years, the rbob gasoline prices are relatively moderate, and the inflation situation has also improved.

Against the backdrop of USA President Joe Biden announcing that he is not seeking re-election, although Vice President Kamala Harris may not be able to fully enjoy all the political dividends during his term, the recent robust economic performance undoubtedly adds a boost to her, while also weakening a core campaign argument by Republican candidate Donald Trump against her.

However, for Harris, the economic recovery may have come a little late. It takes time for the public to fully perceive and digest the improvement in the economy. After experiencing a period of economic fluctuations, people often need time to realize the improvement in their living conditions. This may explain why in most public opinion surveys on economic issues, Harris still lags behind Trump, as consumers' confidence has not fully recovered, and they still feel that their economic situation has not significantly improved.

Unemployment rate

In terms of the labor market, it continues to act as a strong driving force for the economy. The unemployment rate remains near its lowest level in nearly half a century. Although the pace of hiring has slowed down, layoffs are still under control, and employers are reluctant to dismiss employees easily. With wage growth outpacing inflation, employed consumers are forming a virtuous cycle through consumption, thereby ensuring job opportunities for others.

It is worth noting that although the unemployment rate is at a low level in various elections (except in 2000), this does not necessarily bode well for Harris. In the 2000 election, Democratic President Bill Clinton's Vice President Al Gore lost to George W. Bush, one of the most intense elections in history.

Inflation

In terms of inflation, the Consumer Price Index reached a peak not seen in forty years at the beginning of the Biden administration, but has now returned to a reasonable range. Although prices rose rapidly between 2021 and 2022, the current inflation rate remains relatively low compared to the 1980s and 1990s, which may come as a surprise to many voters.

The recent slowdown in price increases is undoubtedly good news, but the cumulative price increases over the past four years have still affected people's bank accounts. Adapting to this change takes time: research by economists at Stanford University shows that it may take people up to five years to psychologically accept higher price levels.

rbob gasoline prices

rbob gasoline prices, as one of the most intuitive economic indicators in voters' daily lives, are often closely linked to consumer sentiment. Political research shows that voters are highly sensitive to gasoline prices: a study in 2016 indicated that with other economic factors and major news controlled, for every 10-cent increase in gasoline prices, the president's approval rating would drop by 0.60%. Therefore, in election years, any fluctuations in the oil market could pose a serious threat to the ruling party.

The decline in inflation is partly attributed to the increase in oil prices and the sharp rise in U.S. exports. However, geopolitical risks, especially the potential for war in the Middle East, could still constrain oil supply and drive up Brent crude prices. However, at present, even without considering inflation factors, oil prices are lower than they were before the 2012 election.

consumer confidence

Despite generally positive economic indicators, why does Harris still lag behind Trump in most polls on who can better handle economic issues? The reason is that consumers are still reeling from the severe impact of post-pandemic inflation. The recovery of consumer confidence takes time, as demonstrated after the 2008 financial crisis. The impact of the pandemic, followed by inflation and the dual blow of Fed rate hikes, has significantly affected consumers' perceptions of the economy, and the economic rebound is not yet complete.

household wealth

The main factors determining the wealth of American households are real estate and the stock market. In recent years, the significant market fluctuations have largely driven the growth of household wealth, but the memories of the market downturn from 2022 to 2023 may still haunt many families.

However, average household wealth can also be misleading: although about 65% of Americans own their own homes, the overall wealth is highly concentrated in the wealthiest 1% of the population. In 2022, about 10% of American households held about 75% of the wealth. Therefore, while wealth fluctuations may affect a broader population, its impact on the wealthiest group is most significant, and its impact on the overall voter sentiment may be relatively limited.

Nevertheless, after Trump's departure, these voters did feel wealthier, partly because the government's spending to boost the economy led to an unreasonable rise in stock prices. Biden has had to deal with the consequences of this spending. Harris, on the other hand, faces the challenge of how to fully leverage this complex economic situation in the election.

Editor/ping