As Donald Trump gears up for a potential second term in the White House, his message to US voters remains consistent: the economy under Joe Biden has been a disaster. While initially, the hard data did not support Trump’s argument, recent developments have given him some evidence to back up his case.
Up until recently, the US has been leading the G7 industrial nations in economic growth since the Covid pandemic. Unemployment rates have been historically low, and America’s self-sufficiency in energy has shielded it from severe inflation shocks. However, the latest set of US jobs figures released last week painted a different picture. Payroll growth in July slowed significantly, and the unemployment rate rose, sparking concerns about the health of the economy.
Financial markets, which had been optimistic about the US economy’s resilience, were rattled by the weakening labor market indicators. The potential for a hard landing loomed large, with Japan’s Nikkei index dropping 12% on fears of a cooling US economy. The Federal Reserve’s Sahm rule, a measure for gauging recession risk, was on the brink of being triggered, signaling a potential downturn in the economy.
While some economists caution against putting too much emphasis on the Sahm rule, citing unprecedented trends in rising unemployment and robust economic growth, others point to warning signs in the market. The performance of companies like UPS, often seen as a barometer of the US economy, falling short of expectations and revising growth forecasts, adds to the concerns about the economy’s trajectory.
As the presidential election draws closer, these economic indicators take on added significance. While an immediate recession may not be imminent, signs of households tightening their spending could spell trouble for the current administration. Kamala Harris, facing off against Trump’s attacks on the economic record, must navigate these challenges as she vies for the presidency.
In conclusion, the shifting economic landscape in the US has injected uncertainty into the political arena. Trump’s narrative of a faltering economy under Biden gains traction with recent data, raising questions about the future direction of the country’s economic policy. As voters weigh their options in the upcoming election, the state of the economy will undoubtedly play a crucial role in shaping their decisions.
