The biggest concern this election cycle has been the economy. Here is what the final reports on the economy indicate as voters make their final decisions.
Vice President Kamala Harris has been partially shackled by President Joe Biden’s poor economic approval ratings. She is working to take the focus off Biden’s handling of the economy and years of high inflation, while former President Donald Trump has argued that voters will be better off economically under him.
Given the importance of the economy in this year’s election, every economic report has been closely analyzed and used by the two campaigns as political fodder.
Inflation
Inflation has been the No. 1 economic concern for voters. Under Biden, the United States experienced its worst wave of inflation in decades, with annual inflation peaking at about 8% in June 2022. Since then, it has fallen to more manageable levels but is still higher than the Federal Reserve would like.
The consumer price index is the most watched inflation gauge. The final report ahead of the election showed that inflation, or the increase in prices, fell a tenth of a percentage point to 2.4% for the year ending in September.
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That is still above the Fed’s 2% goal but shows that there has been meaningful progress in driving down inflation. Democrats have highlighted how inflation is falling, but Republicans have bashed Biden and Harris by blaming them for the inflationary problems to begin with.
“Consumers are feeling the sting of higher prices,” Greg McBride, chief financial analyst at Bankrate, told the Washington Examiner. “Lower inflation doesn’t mean prices are going down. It just means they’re not going up as fast.”
Most notably, in the most recent CPI report, core inflation, a measure of inflation that strips out volatile energy and food prices, actually rose a tenth of a percentage point to 3.3% on an annual basis.
“The good news is that the trend remains broadly disinflationary, but the bad news is that services inflation is still a problem. Inflation is dying but not dead,” said Olu Sonola, Fitch Ratings head of U.S. economic research.
The Fed looks at another inflation gauge, the personal consumption expenditures index, when analyzing its next steps. The PCE index for September, which was released this week, showed PCE inflation falling to 2.1%. However, stickier core inflation remained at a 2.7% year-over-year rate.
Still, despite inflation falling closer to 2% in both indices, many voters aren’t focused on how much prices have risen just over the past year alone. They are comparing prices now to what they were before Biden and Harris entered office. Prices have risen 20% since then in the CPI and 17% as tracked by the PCE index.
Interest rates
The Fed has had to hike interest rates in response to mounting inflation. After interest rates were held at near zero during the pandemic, the Fed finally began raising rates in March 2022, with interest rates hitting a range of 5.25% to 5.50% in 2023. The Fed most recently decided to cut rates for the first time in September and is expected to do so again at its coming meeting.
Like inflation, higher interest rates have made life more difficult for voters. Although they have slowed the pace of inflation, they have made it more unaffordable to take on debt, secure an auto loan, or purchase a home.
Jobs
The labor market has been relatively strong under Biden despite the higher interest rate environment. The economy has added about 16.5 million jobs since January 2021, when Biden first entered office.
The caveat, though, is when Biden entered office, the economy was still millions of jobs short of where it was prior to the pandemic and the mass shutdowns of businesses. The economy was gutted of jobs in the first months of the pandemic but began rebounding in May 2020 and gradually started adding those back. The growth of jobs came under both Trump and Biden.
Employment rates have not fully recovered. The employment-to-population ratio now stands at 60%. That is down from the 61.1% level it was at in February 2020, right before the pandemic took hold.
The latest jobs report, released Friday, flashed warning signs about the labor market.
The jobs market basically flatlined in October, adding just 12,000 jobs, and the unemployment rate remained at 4.1%, the Bureau of Labor Statistics reported.
Investors had expected job growth to slow to 108,000, partly because of damage from hurricanes and a strike at Boeing, but the report was even worse than expected. Also of note is that the private sector shed jobs for the first time since the pandemic.
The Trump campaign immediately jumped on the numbers and tied Harris to the poor jobs report. Karoline Leavitt, Trump campaign national press secretary, said in a statement that Harris “broke” the economy and that Trump would fix it.
“This jobs report is a catastrophe and definitively reveals how badly Kamala Harris broke our economy,” she said. “In a single month, Kamala’s failed economic agenda wiped out nearly 30,000 private sector jobs and nearly 50,000 manufacturing jobs.”
Job openings, reported separately by the Bureau of Labor Statistics, also recently fell to their lowest level since Biden was sworn into office, another indicator that the labor market is softening. Still, weekly jobless claims recently fell to their lowest level since May, according to the Department of Labor, a sign that there is still some underlying strength in the labor market.
Economic growth
Gross domestic product growth, a measure of economic output, increased by 2.8% in the third quarter of this year. The news was released this week in the Bureau of Economic Analysis preliminary estimate.
While there will be two more revisions to the data over the coming weeks, it shows that the economy is continuing to grow at a healthy pace, another economic indicator that Harris and Biden can tout.
“To be in a situation where the economy is continuing to grow and at a faster-than-trend pace is surprising but very good,” McBride said.
Consumer spending helped push up the headline GDP rate, rising at a 3.7% pace in the third quarter. Growth was also driven in part by government spending.
GDP growth has largely been positive during Biden’s time in office, although it contracted in the first two quarters of 2022, which at the time raised concerns that the U.S. would fall into a recession — although those fears never materialized.
The economy expanded at a 3% rate in the second quarter of this year and just 1.4% in the first quarter of 2024.
Looking ahead, official GDP data from the final quarter of this year will first be released in 2025, but the Atlanta Fed’s “GDP Now” tracker predicts that GDP growth in the fourth quarter will clock in at 2.3%, according to the latest estimate.
Housing
The final housing market data before the election is from September. Existing home sales fell to their lowest level in 14 years that month, despite mortgage rates hitting their lowest level in over a year in September.
Existing home sales in September fell 1% to a seasonally adjusted annual rate of 3.84 million, the National Association of Realtors reported. That is lower than economists had expected and raises alarms about the state of the housing market.
While mortgage rates were down in September, they have recently risen again, adding to the pressure facing the housing market.
As of Friday, the average rate on a 30-year, fixed-rate mortgage was at 7.05%, according to Mortgage News Daily, which tracks daily changes in rates. That is up from a trough in September, the month the latest data are tracking, where rates fell to about 6.14%.
Meanwhile, new home sales rose 4.1% in September to a seasonally adjusted annual rate of 738,000.
The housing market has been hit hard by the Fed raising interest rates. That is because mortgage rates tend to anticipate Fed actions and move somewhat in tandem with the Fed’s target interest rate.
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Housing has been another painful spot for voters and has priced many would-be homebuyers out of the market.
“If you’re a first-time buyer who’s trying to get in, it’s really, really tough,” McBride said. “Home prices are high, financing costs are high — inventory has improved, but it’s still lower than would be a deemed normal.”
