The US economy keeps growing, and Americans continue to be unimpressed. Situation normal.
Can Kamala Harris get Americans more psyched about a solid economy than Joe Biden can? We'll soon find out. For now, however, Americans are still adjusting to the most volatile presidential race in decades.
The latest upheaval, of course, was President Joe Biden’s stunning withdrawal from the race on July 21, less than four months before Election Day. Biden’s withdrawal followed the July 13 assassination attempt on Republican nominee Donald Trump, which came six weeks after a New York jury convicted Trump on 34 felony counts.
Vice President Harris rapidly secured pole position in the Democratic race and is due to win the official presidential nomination at the party’s convention in August. But she’s already campaigning as the natural successor to Biden, who’s now playing the role of Democratic eminence.
So it’s now Harris’s job to persuade Americans that the economy really is as good as the numbers suggest. The latest evidence in her favor is second quarter real GDP growth of 2.8%, the umpteenth time during the Biden (Harris) administration that growth exceeded economists’ forecasts. Except for the first half of 2022, economic growth has been solid for the entirety of the Biden (Harris) administration.
Also: A key inflation gauge released July 26 shows inflation heading back to normal levels. Investors think the Federal Reserve is sure to start cutting interest rates in September, which will spell future relief for homebuyers and other borrowers.
Drop Rick Newman a note, follow him on X, or sign up for his newsletter.
Hiring remains solid, though it’s cooling a little, which is exactly what the Fed wants to see before cutting rates. While all this data tells us about the past rather than the future, economists think this is the immaculate “soft landing” and foresee no unhappy surprises anytime soon.
“The engine of the economy is encouraging,” Oxford Economics wrote in its analysis of the GDP data on July 25. “Growth in real consumer spending perked up after disappointing in Q1. The moderation in inflation is boosting real disposable income and we expect this to support spending in the second half of the year.”
Goldman Sachs, meanwhile, expects full-year GDP growth of 2.3% for both 2024 and 2025, with inflation falling back to pre-COVID levels by next year. The New York Times ran a recent piece arguing that whoever is president in 2025 is likely to enjoy a Goldilocks economy with normal inflation, declining interest rates, and sustained growth.
So, normally gloomy Americans are finally perking up, right? Eh, no.
The University of Michigan sentiment index fell in July and remains well below pre-COVID levels. Prices that are still elevated, along with high interest rates, continue to dog consumers, even though they seem comfortable spending. Many Americans think the economy is in recession, which is not remotely the case.
With Harris replacing Biden as the Democratic presidential nominee and the leading incumbent, we now get to conduct an experiment on public attitudes about the economy: Has Joe Biden himself been the main thing bumming people out? Or is it economic conditions, pure and simple?
In her first week as Biden’s heir apparent, Harris bounded around the country flashing big, confident smiles and promising to take down her Republican rival, Donald Trump. Polls show Harris doing better against Trump than Biden. Young voters especially disgusted with the mess the olds have made of the country seem to be giving Harris a look. Compared with the frail and raspy Biden, Harris seems to be connecting.
If voters want a younger and more energetic messenger on the economy, then they ought to respond positively as Harris becomes the one touting the record job growth and legislative accomplishments of the Biden-Harris team. That would be a timely advantage for her, just as voters are deciding whom to vote for this fall.
If voters remain gloomy, they can certainly find a fellow sourpuss in Trump, who has mastered the art of the grievance and routinely reminds listeners of everything that is, or could be, wrong with America. The economy isn’t one of those things, and Kamala Harris could turn out to be the Apostle of Okay that voters have been waiting for.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on X at @rickjnewman.
Read the latest financial and business news from Yahoo Finance