With two weeks remaining until the U.S. presidential election, so much is going right in the world’s largest economy. The unemployment rate sits at roughly 4 per cent – quite low by historical standards. The stock market is riding a lengthy bull run, padding the pockets of millions of people. And in maybe the clearest sign of optimism, Americans are starting businesses like never before, a testament to the country’s entrepreneurial instincts.
Despite a rapid increase in interest rates over 2022 and 2023, the United States has not only avoided a recession – counter to many such predictions on Wall Street – but it’s growing so quickly that it’s leaving peer countries in its wake.
Kamala Harris, the Democratic Party candidate for president, can point to any number of indicators that show the economy is scorching under the Democrats.
And yet, Americans are feeling pretty glum about the state of affairs. The University of Michigan consumer sentiment index has been considerably weaker under U.S. President Joe Biden than under his Republican predecessor, Donald Trump. As part of Mr. Trump’s campaign for president, he’s repeatedly seized on something people hate: the dramatic upswing in consumer prices.
On a handful of topics, from jobs and immigration to affordability and wealth, these are the economic charts that each campaign wants voters to see.
Inflation/affordability
Harris
Inflation is Ms. Harris’s biggest vulnerability. It may also be one of her strongest economic talking points.
After peaking at a four-decade high of 9.1 per cent in June, 2022, the annual inflation rate in the U.S. has moved steadily lower, reaching 2.4 per cent last month. That’s only slightly above the Federal Reserve’s target of 2 per cent, and in September the central bank started lowering interest rates with an unusually large half-percentage-point cut.
The surge in prices and borrowing costs as the COVID-19 pandemic took hold has been noxious for incumbent politicians, who have had to relearn the lesson from the 1970s and 1980s: Voters hate nothing more than rising prices, especially for food, gasoline and housing.
But things are looking up. Inflation has retreated rapidly without the American economy falling into a recession. On average, wages have risen faster than inflation for the past 16 months, restoring some of the purchasing power lost in 2022 and 2023.
This apparent soft landing, which many economists thought was impossible, has more to do with the unwinding of pandemic-era supply shocks and the actions of the Fed than anything done by the Biden administration. But slowing inflation, falling interest rates and rising wages provide a tailwind for Ms. Harris heading into the election.
Trump
Inflation is way down, but prices are not. That could help explain the pervasive gloom about the U.S. economy that may power Mr. Trump to victory.
Inflation – the rate at which prices change – has declined from a four-decade high to an almost normal level. But prices, which surged as the pandemic spread, remain much higher than American shoppers are used to.
Grocery prices, for instance, are up around 20 per cent since the start of Mr. Biden’s presidency. A dozen eggs costs, on average, around US$3.80 today compared with US$1.40 in January, 2021.
Wages have also increased, but not enough to make up for the loss of purchasing power owing to inflation. And in any case, people are psychologically inclined to notice rising prices more than bigger paycheques.
Mr. Trump is promising to bring prices down. “You just watch: They’ll come down, and they’ll come down fast,” he said in August.
That wouldn’t necessarily be a good thing. The Federal Reserve seeks price stability, not deflation, which can be as economically damaging as inflation as consumers delay purchases to wait for lower prices. But promising price cuts is a potent political message for a country still reeling from the largest sticker shock in a generation.
Wealth
Harris
It’s rare for Mr. Trump to give a speech these days that doesn’t mention one of his favourite topics – the stock market – whether he’s predicting a colossal crash will occur if Ms. Harris wins or boasting about how stocks performed under his first term. Ms. Harris, on the other hand, steers clear of the topic. But if she wanted to, the Democratic candidate could take a page out of the Trump campaign handbook and brag about stock market gains under the Biden administration. After all, the S&P 500 Index has turned in a nearly identical performance to how stocks performed by this point in Trump’s first term.
The strong market reflects a few things. Interest rates are finally coming down while corporate profits remain high. But there have also been warnings from some economists and market strategists that Ms. Harris’s proposal to increase the corporate tax rate to 28 per cent from 21 per cent would dramatically weigh down markets.
In pushing stocks to record high levels, even with Ms. Harris and Mr. Trump tied in the polls, investors could be wagering the Democrats won’t also win both the House and Senate, which would be necessary for a corporate tax increase. Or maybe it’s simply that investors don’t care – history shows markets have almost always gone up no matter who was president.
Trump
The idea that American households have been impoverished by the policies of Mr. Biden and Ms. Harris has been part of Mr. Trump’s drumbeat of doom throughout the campaign. “If Kamala enacts her agenda, she’ll destroy America,” he told the crowd at a rally in Juneau, Wisc., earlier this month. “Our agenda will make America safer and wealthier than ever before.”
On the surface, American families have done well since Mr. Biden took office at the start of 2021, with the collective net worth of households growing by roughly 20 per cent as of the second quarter of 2024. That was on par with how net worth had grown during the same period under Mr. Trump. However, the strongest bout of inflation in decades has had a corrosive effect on the wealth of the nation. After adjusting for inflation, households were collectively no better off than they were in early 2021, despite years of soaring stock prices and a housing market that has continued to climb higher, albeit at a slower pace than in the first two years of the pandemic.
Would wealth rise faster under Mr. Trump, as the candidate repeatedly insists? It all comes down to whether his trade and immigration policies push inflation back up again, as many economists have warned. Another round of high inflation under Mr. Trump would erode any real household net worth gains the same way it did under Mr. Biden.
Corporate dynamism
Harris
“I am a capitalist,” Ms. Harris has repeatedly assured American voters in recent weeks, brushing aside Mr. Trump’s red-baiting, “Comrade Kamala” attacks. But while her team has spent considerable effort on a charm offensive to win over skeptical corporate executives and she’s rallied support from a number of prominent big business leaders, it’s also clear she’s more comfortable promoting policies aimed at businesses of the small-b variety.
A cornerstone of Ms. Harris’s economic agenda is a pledge to boost existing tax incentives for startups from US$5,000 to US$50,000. Meanwhile, she’s led the rollout of recent rule changes by the Biden administration to ease rules around government-backed small business loans.
Those efforts play to one of the more surprising economic developments of the last four years: a revival in entrepreneurship in America. As the pandemic has waned, the U.S. has enjoyed a surge in new business creation, based on applications for businesses that are considered likely to become future employers.
The White House has strived to take credit for that development, though it was already beginning to unfold under Mr. Trump. Even so, it’s a trend Ms. Harris hopes will burnish her capitalist bona fides.
Trump
Slashing corporate taxes was a hallmark achievement of Mr. Trump’s first term, and it won him plenty of fans on Wall Street. Now he’s hoping for a repeat. The Republican candidate wants to lower the corporate tax rate to 15 per cent, but only for those companies that “make their products in America.” Since 2017, the rate has been 21 per cent, after Mr. Trump lowered it from 35 per cent.
The proposal stands in contrast to Ms. Harris’s pledge to increase taxes on corporations and the wealthy, and it is part of Mr. Trump’s ever-widening pledge of tax cuts for Americans.
Yet it remains unclear how he intends to pay for it all. Mr. Trump’s plan would increase the U.S. debt by US$7.5-trillion through 2035, according to an analysis by the Committee for a Responsible Federal Budget. (It found Ms. Harris’s plan would add US$3.5 trillion.)
Mr. Trump and his running mate, J.D. Vance, have repeatedly dismissed fears of runaway deficits by claiming that revenues from a 10 per cent across-the-board tariff on imports and higher duties on Chinese-made goods will balance out the tax cuts. Never mind that the experience of Mr. Trump’s own first term, with its big tax cuts, big tariffs and even bigger deficits, shows that’s not how things would likely unfold.
Jobs
Harris
The U.S. is a job-creating juggernaut. Early in 2023, the unemployment rate ebbed to 3.4 per cent – the lowest level since the late 1960s. And while it’s drifted higher in subsequent months, no thanks to a rate-hiking cycle, the jobless rate is still quite low by historical standards: 4.1 per cent.
The U.S. experienced a “Great Resignation” phenomenon over 2021 and 2022 that, while a nuisance for employers, saw people switch to jobs with better pay and conditions. The trend was especially beneficial to those on the low end of the income distribution: the young, the less educated and those in low-wage service jobs.
The pace of hiring has slowed from the rabid pace of a couple years ago, but it remains hefty: So far in 2024, the U.S. economy has added a net 200,000 positions a month. And with the Fed starting to lower interest rates, pressure is being eased on debt-addled businesses.
The U.S. added 254,000 jobs in September, a result that easily outpaced analyst expectations. Scott Anderson, chief U.S. economist at Bank of Montreal, wrote in a client note that he was “almost at a loss for words” to describe the buoyant numbers. “Shocking strength and resilience,” he added.
Trump
Mr. Trump envisions a thriving U.S. economy that looks much like it did in decades past, with a bountiful number of blue-collar workers. Under his presidency, the U.S. will become a “manufacturing superpower” that protects Americans from “unfair foreign competition,” his platform boasts.
The Republican candidate has proposed higher tariffs on imported goods and lower corporate taxes to facilitate this transformation. (As economists have noted, higher tariffs will raise prices for U.S. consumers, despite Mr. Trump’s assurances they won’t.) The premise for Mr. Trump’s throwback strategy is questionable: As a rich country with a strong currency, the U.S. is able to import goods for cheap.
Up until the pandemic, the U.S. added roughly 400,000 manufacturing positions during the first Trump presidency, an increase of 3.3 per cent that lagged overall job creation. The total number of people employed in manufacturing has held steady at just under 13 million for more than two years.
Immigration
Harris
Ms. Harris is quite exposed to criticism on border control. Most Americans, including Democratic backers, consider the border situation a “crisis” or a “major problem,” according to survey results published by the Pew Research Center earlier this year. However, Ms. Harris can point to improvements in some areas: Apprehensions on the U.S.-Mexico border have plummeted this year – albeit from a record high in 2023. (Mr. Biden signed an executive order in June that made it tougher for people to seek asylum, one of several reasons for the decline.)
Mr. Trump has claimed that unauthorized migrants are stealing jobs from Americans, something that Ms. Harris could credibly push back on. The unemployment rate for U.S.-born individuals is around 4 per cent, in line with overall levels. And while she may be reticent to speak of any upsides, unauthorized immigrants are highly engaged in the economy. The majority are working, according to Pew estimates, and they’re well represented in critical areas of U.S. production, such as residential construction and agriculture.
Trump
The Trump campaign engages in inflamed rhetoric about immigration that is littered with falsehoods. (An example: the baseless claim that Haitian migrants are eating people’s pets.)
Here are some facts on the matter. The number of unauthorized immigrants in the U.S. peaked at 12.2 million in 2007 and edged lower over many years, according to estimates from the Pew Research Center. However, the unauthorized population has started to pick up again, reaching 11 million in 2022, and Pew says this group has likely grown further.
To bring down those numbers, the Republican platform says it would “carry out the largest deportation operation in American history,” sending millions of people out of the country.
Any such operation would have sweeping implications for the labour market, because there were 8.3 million unauthorized workers as of 2022, according to Pew estimates.
Mass deportation would lead to weaker employment and gross domestic product than otherwise over the long term, according to a working paper from the Peterson Institute for International Economics, a non-partisan think tank. And it would also lead to higher prices in the short run. “This policy induces a classic supply shock, where prices rise and output falls,” the paper reads.
America’s place in the world
Harris
If the world is taking advantage of America, as many in Mr. Trump’s MAGA-sphere insist, other countries are not doing a very good job of it. If anything, America’s economic performance is the envy of many countries, with the U.S. leading Group of Seven in GDP growth adjusted for population and inflation.
Even if this is Mr. Biden’s economy, Ms. Harris’s supporters insist she deserves credit, particularly as she tries to improve her polling on economic matters. It’s been a difficult slog, with the high inflation of 2022 and 2023 leaving many Americans feeling less well off.
But with inflation easing, she is doubling down on Mr. Biden’s record, and proposing child tax credits, homebuyer supports and small business tax deductions that she says will create an “opportunity economy.” The extent to which voters can forget what they dislike about Bidenomics and embrace Kamalanomics could determine whether she prevails on Nov. 5.
Trump
“To me the most beautiful word in the dictionary is tariff,” Mr. Trump said during an economic policy interview with Bloomberg in Chicago recently. By that reasoning, the ugliest word for him would surely be deficits, as in trade deficits.
Since entering politics, Mr. Trump has railed at America’s trade imbalance with the world, particularly when it comes to auto manufacturing. His new solution is the same as his old one, tariffs: only on an even grander scale. In that same interview Mr. Trump vowed to erase America’s trade deficit by imposing tariffs of “100, 200 or 2,000 per cent” on automakers who ship cars from Mexico or China to the U.S.
Aside from Mr. Trump’s dubious claim that slapping tariffs on foreign imports won’t make those items more expensive for American consumers, the idea that higher tariffs would lead to lower trade deficits is undermined by the past decade of trade. During Mr. Trump’s presidency, America’s trade imbalance deteriorated despite the tariffs his administration imposed, and the trend only worsened under Mr. Biden, who kept much of Mr. Trump’s protectionist trade policies intact.