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The red shift in 2024 was so broad that no one localized issue appeared to tip the election in President-elect Donald Trump’s favor. However, one key factor may have been voters’ widespread dissatisfaction with the economy.
Enduring pessimism about the US economy has puzzled political analysts, given that most major indicators suggest it is strong and that the US has recovered better than other countries from a pandemic-induced slump. Inflation has come down significantly from its peak in June 2022, slowing price hikes for basic goods. The Federal Reserve started cutting interest rates, making borrowing money cheaper. The economy has continued to grow at a solid rate. Unemployment dipped to its lowest level in 54 years in 2023 and stayed within a desirable range.
On paper, everything looked great. But in poll after poll ahead of the election, voters signaled concern for the economy and ranked inflation as their top issue. The rough, preliminary voting data available in exit polling showed the same trend.
At the heart of that disconnect might be elements that broad economic indicators often struggle to capture: Despite a “strong economy,” many Americans continued to feel the burden of higher prices, struggled to find work, and took on more debt. And the Election Day results suggest they blamed Democrats — specifically President Joe Biden and Democratic nominee Vice President Kamala Harris — for those problems.
Here’s what the rosy portraits of the economy embraced by Democrats may have missed.
There was a real inflation backlash
Though inflation is now down to 2.4 percent from its post-pandemic high of 9.1 percent, it’s been clear for months that Americans are still hurting financially and psychologically.
Wage growth has caught up with inflation on average. But wage gains haven’t been uniform: The lowest-paid workers saw some of the biggest gains, particularly in the leisure and hospitality sectors, but other industries, from advertising to chemical manufacturing, saw their wages decline relative to inflation.
But even if workers received raises that outpaced inflation, that doesn’t help with sticker shock. Research has shown that consumers have an internalized “reference price” — a conception of what constitutes a fair price for a good they routinely purchase. If that imagined price doesn’t match up with reality, consumers feel short-changed.
Though a person’s reference price can change, it usually does so slowly, following the normal pace of inflation (roughly 2 percent per year). Consumers haven’t had much time to adjust amid rapid inflation in recent years. That causes them to overestimate inflation: An August YouGov poll found that most consumers think inflation is significantly higher than it actually is.
Consumers also often misunderstand how inflation works. The important thing to know is that it only goes one way: When inflation decreases, that just means that prices are increasing less quickly, not that they are going down. (That can happen, though rarely.)
Prices going down, a phenomenon known as deflation, would be a potentially worrying signal about the health of the economy. If consumers pay less for a good, that can translate to less money to pay the workers who produce and distribute it, leading to less consumer spending overall and slower economic growth.
The job market is tougher
The days of the pandemic-era “Great Resignation”— when employers struggled to hire and workers had their pick of jobs and the ability to demand higher wages — are well and truly over. The unemployment rate has ticked up in recent months to 4.1 percent, and job growth has slowed to levels not seen since 2020.
This is still within the realm of what economists would consider low unemployment. But the top-line rate doesn’t tell the full story.
For one, people are staying unemployed for longer: 1.6 million Americans were unemployed for a period of at least 27 weeks in October, compared to just 1.3 million the same month last year.
Many workers may also find themselves underemployed, stuck in part-time work or a job that doesn’t require their training or qualifications. This is especially true for recent college graduates, over half of whom were underemployed a year after graduation, according to a February report by the Burning Glass Institute and the Strada Institute for the Future of Work.
Some industries are also cutting jobs. That includes jobs in manufacturing and temporary help services, which have decreased by 577,000 since March 2022.
The overall unemployment rate doesn’t really reflect these nuances, which suggest Americans’ work lives may not be as rosy as the top-line number makes them appear.
Americans have less money and are taking on more debt
After a brief spike in savings rates during the pandemic due to a series of stimulus checks, Americans are now saving less than they were pre-pandemic. This creates a cycle where Americans have less money, so they borrow more. Because interest rates have been high, borrowing has become more expensive, leaving them with even less money.
Americans are pulling from their now-depleted savings and amassing debt on credit cards and other revolving credit plans in which consumers can repeatedly borrow money up to a set limit and repay in installments. The total amount of credit card debt in the US reached an all-time high of $1.14 trillion as of October, with individuals owing an average of $8,000.
Credit card delinquency rates have gone up. Young adults in particular, many of whom are also struggling with high student loan debt, are increasingly falling behind on their credit card payments. At some point, something has to give.
This might be part of the reason many Americans still yearn for the economy under Trump in 2019, when they had more cash on hand and weren’t staring down so much debt.
