Tuesday, December 24, 2024

The data says the US economy is strong. Swing-state voters disagree

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Bill DeJong, owner of Alger Hardware and Rental just outside of Grand Rapids, in Michigan’s Kent County, is “not 100 per cent there” on whether to vote again for Donald Trump in November’s presidential election.

DeJong is not a fan of Trump’s personality or his plan to deport immigrants. But in two decades running the store, the 62-year-old has never seen prices rise like they did in recent years. He pins some blame on President Joe Biden’s stimulus spending.

“Prior to Covid, if I had 10 items in a week’s order that I would have to raise the price for, that was a lot. During Covid, it went to three or four pages with 50 items on each,” he said.

“Things aren’t going up as fast any more, but I don’t think anything is coming down.”

Bill DeJong
Hardware store owner Bill DeJong: ‘[Prices] aren’t going up as fast any more, but I don’t think anything is coming down’ © Colby Smith/FT

With just weeks left in the US presidential race, undecided voters like DeJong in industrial swing states such as Michigan are in the sights of Trump and Democratic vice-president Kamala Harris as they spar over the economy — the electorate’s decisive issue.

“If you turn on your TV in this state, you cannot avoid it,” said Edward Montgomery, president of Western Michigan University. “This is definitely an in-play state, and this election lets you know how intensely in-play it is.”

That is true especially in Kent County, which voted for Trump in 2016 but Biden in 2020, helping him win Michigan by about 150,000 votes, or just under 3 percentage points.

The latest polls from Michigan put Harris 1.6 points ahead of Trump, a measure of her struggles in the so-called blue wall states that helped put Biden in the White House. It may also reflect anger in Michigan’s big Arab-American community about Biden’s — and now Harris’s — support for Israel in Gaza.

The Harris campaign hopes a backdrop of benign US economic data — strong jobs growth, waning inflation and falling interest rates — and proposals to crack down on price gouging will strengthen her slender lead in the state.

Mary Palmer
Retiree Mary Palmer is ‘optimistic’ about the US outlook © Colby Smith/FT
Ryan McVicker
Welder Ryan McVicker says ‘Republicans are probably better with money’ © Colby Smith/FT

But inflation has left its mark, and Michigan’s voters are divided.

Mary Palmer, a 63-year-old retiree in Boyne City, Michigan, said she was “optimistic” about the US outlook and would cast her vote for Harris.

Others are angry — especially about prices.

“It’s outrageous,” said Ryan McVicker, a welder at manufacturer Bradford White in Middleville, of his grocery and electricity bills. “Republicans are probably better with money,” he added, explaining his support for Trump.

The Biden-Harris administration disputes that, while touting its efforts to cut costs as well as its new industrial strategy: vast subsidies designed to revive manufacturing in industrial heartlands such as Michigan, and which promise to deliver jobs in the long term. But many Michiganders are struggling with what they say is a cost of living crisis now.

“The [Biden] administration’s policies have caused more harm to the people we serve in terms of the number of people coming in,” said Ken Estelle, president of Feeding America, a food bank in West Michigan.

Visits to his food pantries in the state had risen by more than 20 per cent over the past 12 months, he said, after a nearly 30 per cent increase the year prior.

“It is hard to overcome the prior three years of really disabling prices,” Estelle said.


Trump has tapped into these feelings of economic discontent on the campaign trail. “Our country is in trouble. It’s a mess,” he said at a rally just outside Walker, in Michigan’s west, in late September.

A recent poll by the Detroit Regional Chamber found that 47 per cent of registered voters thought the state’s economy was on the “wrong track”, compared with 43 per cent with a rosier view. A New York Times-Siena poll of likely voters in Michigan found 55 per cent trusted Trump on the economy versus 42 per cent for Harris.

The macroeconomic data tells a more positive story about the US under Biden-Harris.

Despite more than a year of high interest rates, the economy has grown briskly. The Federal Reserve Bank of Atlanta estimates that it will expand by about 3 per cent in the third quarter, among the fastest of the world’s advanced economies.

Line chart of people unemployed for 15 weeks or more showing that unemployment for longer stretches is ticking up

The US labour market has remained strong even while inflation has plunged from its 2022 peak. In September, the unemployment rate fell back to 4.1 per cent — higher than last year but still historically low.

Even so, some warning signs have flashed for the economy.

The number of Americans pursuing a second job is rising. So is the number of people unemployed for 15 weeks or longer. Credit card delinquencies are up, as people burn through cash handed out by the government during the pandemic.

“People don’t feel as secure now,” said Paul Isely, an economics professor at Grand Valley State University in Michigan. “Even if lots of other markers in their life are better off, they know that they are consuming past their means, whereas before it was hidden by the fact that they had these excess savings.”

Nelson Sanchez
Nelson Sanchez, chief executive of RoMan Manufacturing, was forced to cut his workforce © Colby Smith/FT

Several businesses in Michigan said they felt the pinch this year.

“We were firing on all cylinders, and then in January, it’s like somebody flipped a switch,” said Nelson Sanchez, chief executive of RoMan Manufacturing in Grand Rapids. It forced him to cut his workforce.

He blamed the downturn on a pullback in consumer demand and less business from the automotive industry.

Orders were now trickling in again, Sanchez said, making him “optimistic” about 2025, when his company might begin hiring again.

Zachary Verhulst, who runs Pure Architects in Grand Rapids, said high interest rates forced people to shelve planned projects last year.

“People were panicking, trying to figure out what the heck was going to happen,” the 37-year-old said.

Verhulst said he had begun to field phone calls from clients ready to consider breaking ground ever since the Fed earlier this year signalled its intent to lower interest rates.

The hints of a turnaround have left Michael Hyacinthe, a veteran who opened up Has Heart Coffee Shop in downtown Grand Rapids last year, feeling upbeat. Customers were even willing to gift a coffee to military personnel when they paid for their orders in his shop.

“I see the positive momentum that’s happening,” he said. He will vote for Harris.

Michael Hyacinthe
Michael Hyacinthe, a veteran who opened a coffee shop, sees ‘positive momentum’ in the local economy © Colby Smith/FT

The challenge for Harris will be tapping that vein of optimism in Michigan.

Montgomery, a life-long Democrat who was previously the Department of Labor’s chief economist, said that could prove challenging.

“Here’s the problem: inflation is the rate of increase and [that] has slowed, but the public’s focus is on the absolute price,” the president of Western Michigan University said. “It takes a lot for the price level to come down. That would be a recession and deflation, so it’s not quite clear you really want that.”

For residents in the state’s most populous area — spanning Detroit, Warren and Dearborn — everyday costs are now much higher and still rising. Inflation jumped to almost 10 per cent in 2022 and was still above 3 per cent as of August, according to federal data.

That has left housing-related expenses up 36 per cent since Biden entered office. Petrol is more expensive than under Trump. Grocery prices have risen 25 per cent in the past four years.

Only last year did US wages increase faster than prices for goods and services.

Trump says his solution is to cut energy costs and regulations, although economists warn his plans for widespread tariffs and tax cuts could drive inflation higher.

Harris’s plan centres on providing social safety benefits and support for small businesses, coupled with more taxes on the wealthy and big businesses.

Many voters are unconvinced about both — and sceptical that a divided Washington will deliver help anyway.

“Is this really the best both sides could do?” said hardware store owner DeJong.

Additional reporting by Sam Learner and data visualisation by Oliver Roeder

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