U.S. Financial Conditions Worsen in October – Alarming Unemployment and Inflation Data Confirmed

September’s inflation report did not deliver the positive news Vice President Kamala Harris may have anticipated, as prices ticked up slightly, while jobless claims surged to a 14-month high. Despite this, the job market exceeded expectations, creating 254,000 new jobs. The economy, however, remains at the forefront of voters’ minds, as recent polling indicates. Here’s a breakdown of the recent economic data and its political ramifications.

Inflation

According to the U.S. Labor Department, the Consumer Price Index (CPI) for September rose by 0.2%, bringing annual inflation to 2.4%. This slight increase was above economists’ expectations, who had forecasted a 0.1% rise and an annual rate of 2.3%. Meanwhile, core inflation, which excludes food and energy prices, rose by 0.3% in September, resulting in an annual rate of 3.3%. This exceeded the 0.2% monthly increase predicted by analysts.

Inflation Matters

Core inflation is critical because it measures the cost of essentials like housing, healthcare, motor vehicle insurance, and transportation—categories that hit household budgets hard. Although inflation has come down considerably from the highs of 2022, when it topped 9%, prices still haven’t returned to pre-pandemic levels. This persistence of elevated costs continues to affect voter sentiment, especially as many households feel the pinch of higher day-to-day expenses.

Job Market

Despite inflation’s rise, the job market showed surprising resilience. The number of jobs added in September exceeded forecasts, totaling 254,000 for the month. However, initial jobless claims reached 258,000—the highest number in 14 months. This mixed data signals that while companies are still hiring, layoffs have also increased, adding some uncertainty to the labor market’s overall strength.

Balancing Act for Households

For households, this creates a complex situation. More job opportunities can boost confidence, but rising prices and jobless claims could undermine that optimism. While wage gains have kept up with inflation to some extent, higher costs for housing, healthcare, and other essentials can erode these gains.

Voters’ Economic Concerns

As the 2024 election approaches, the economy is a key concern for voters. A Gallup poll from late September showed that 52% of registered voters consider candidates’ positions on the economy “extremely important” in shaping their voting decisions—the highest percentage since the 2008 recession. Another 38% of voters said the economy was “very important” to their choices.

Polling also indicates that former President Donald Trump is viewed by a majority of voters as more competent in managing the economy than Harris. Fifty-four percent of respondents favored Trump’s economic approach over Harris’s 45%, according to the same poll.

Inflation Impacts Harris

Though Vice President Harris has outperformed President Biden in terms of voters’ perception of her handling of the economy, she faces substantial challenges. Many voters are still struggling with elevated costs, despite inflation having cooled from its 2022 peak. This perception limits how much good news, like lower inflation, can actually benefit her standing.

Carly Cooperman, a Democratic pollster, noted that Harris is benefiting from being a newer candidate compared to Biden, yet voters still feel burdened by high costs. This makes it difficult for Harris to claim a clear win on economic issues, especially when Trump is emphasizing how much lower inflation was during his time in office.

Political Finger-Pointing

Trump, never one to shy away from touting his economic record, criticized the Biden-Harris administration’s handling of inflation during a recent speech. He claimed that under his leadership, inflation was negligible, while under the current administration, economic mismanagement has led to persistent price increases. Trump attributed part of the blame to Harris, highlighting her pivotal role in passing the $1.9 trillion American Rescue Plan in 2021—a piece of legislation many economists warned could exacerbate inflation.

Trump’s critique resonates with voters who feel the sting of rising prices. While Harris can point to the drop in inflation from its 2022 peak, Trump is capitalizing on the notion that the recovery has been too slow and insufficient for many American households.

The September inflation report and job numbers serve as a stark reminder that while some progress has been made in stabilizing the economy, challenges remain, and they could influence the outcome of the 2024 election.

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