Midterm pocketbook pain bites Trump
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Five weeks before the midterms, Americans' pocketbook pain is getting worse: paychecks haven't kept up with inflation for the better part of this year, and borrowing costs have surged.
Why it matters: President Trump's record is effectively on the ballot, and economic sentiment remains deeply depressed, including among Republican voters.
This is the backdrop as voters prepare to cast their midterm ballots:
1. In the last five months, pay for rank-and-file workers has trailed inflation.
- That's a recent reversal: Since the start of 2021, hourly pay for rank-and-file workers has climbed 29%, slightly outpacing the 27% gain in consumer prices.
2. Consumer prices are up over 5% since Trump took office, piling on Biden-era gains.
- It costs about $20 more to fill a 15-gallon tank of gas than it did a year ago. The national average for regular gas is $4.48 a gallon, up $1.34 from last September, according to AAA.
3. Mortgage rates are back above 7%, while rates on credit cards, auto and other loans remain elevated.
Zoom out: Consumer sentiment is sitting at the second-lowest reading on record, according to the University of Michigan's tracker.
- Contrast that to Trump's first term: Before the pandemic, the same survey showed one of the strongest periods ever for America's consumer sentiment.
- Another gauge shows a similar decline: The Conference Board's confidence index averaged 126 from 2017-2019, compared with just 89.4 in August, the latest reading.
The other side: The lousy sentiment comes alongside strong economic growth that's apparent in the GDP figures — but hard for consumers to appreciate at the grocery store or the gas pump.
- A closely watched GDP tracker published by the Atlanta Fed shows the economy growing at a blistering 5% pace this quarter.
- And unemployment remains a historically low 4.1%.
Friction point: Paradoxically, the economic strength Trump wanted is contributing to the affordability concerns weighing on his approval ratings.
- A hotter economy strengthens the case for further Federal Reserve rate hikes and intensifies competition for capital, helping feed the sharp rise in long-term rates that underpin household borrowing costs.
- The AI boom is also contributing to job anxiety. Over a quarter of U.S. workers now worry technology could make their jobs obsolete, according to Gallup — a record high.
What they're saying: "The hard data of actual consumer spending and retail sales have been robust throughout President Trump's term so far," White House spokesman Kush Desai says. "American consumers are proving their resilience with their dollars every day thanks to the Trump administration's tax cuts, private-sector job creation, and investment boom."
The bottom line: President Trump has the growth boom he wanted, but not the sentiment uplift that usually comes with it.
