It was Bill Clinton’s campaign guru James Carville who codified the insight that the Democratic Party’s electoral prospects were destined to rise as Americans’ feelings of economic well-being slid: “It’s the economy, stupid,” was his mantra.
Tuesday’s election results validated Carville’s principle. One can see that in the surprisingly robust victory margins of gubernatorial candidates in Virginia and New Jersey, as well as the decisive margin of voter approval of California’s Proposition 50 redistricting ballot initiative. The lesson delivered by the results is that Americans sense that the economy is reeling.
They’re right. Most economic indicators are flashing yellow or even red. How bad things have gotten, and how bad they may get, is a bit hard to gauge at this moment, because the steady flow of government economic statistics has been cut off by the government shutdown.
The indicators of economic pain are all around us. Every one of the leading opinion polls taken since Oct. 1 has shown Donald Trump’s approval rating on the economy to be deeply underwater, with the average calculated by RealClearPolling at negative 13.4 points.
The University of Michigan’s consumer sentiment index dipped modestly in October to 53.6, down by 1.5 points from September, but it’s massively down from October 2024, when it was 70.5.
A majority of Americans (53%) believe the economy is getting worse, according to a Harris poll commissioned by the Guardian. The poll also reported that 75% of respondents had seen their monthly household costs rise by more than $100.
One might dismiss these expressions of disquiet as mere “vibes,” but the raw figures bear them out. Inflation is unmistakably on the rise again. The annualized increase in the consumer price index rose to 3.0% in September from a low of 2.3% in April, according to the Bureau of Labor Statistics.
That’s an improvement since the pandemic-driven peak of 9.1%, in June 2022, but the trend is moving in the wrong direction. The rise is especially marked in food, with price increases of 3.1% annualized, up from 2.1% in May. That has potent political implications, since food is an expense experienced by consumers on almost a daily basis.
Job growth has ebbed, according to the private payroll firm ADP. The firm’s latest monthly report, issued Wednesday, showed private sector hiring to have increased by 42,000 jobs, but that increase was “modest relative to what we reported earlier this year,” ADP said. ADP also revised its September report to show a decrease in hiring by 29,000 jobs, a slight improvement over the initial estimate of negative 32,000.
Monthly job creation has been fading since Trump took office, with the figures turning negative in June, August and September.
Meanwhile, farm bankruptcies have been rising throughout the Trump term, with 93 filings in the second quarter that ended Sept. 30, up from 88 in the first quarter and from only 47 at the end of 2024. The prices of such key crops as corn, wheat and soybeans have been falling as Trump’s trade war shrinks foreign demand for American produce.
Consumer spending growth fell to 0.5% in the first quarter of this year and to 1.4% in the second quarter, a serious slowdown from the 3.7% and 4.0% growth rates in the third and fourth quarter of last year, before Trump took office, Fitch Ratings calculated in September.
The headwinds threaten to keep building, especially if the government shutdown continues. Transportation Secretary Sean Duffy has warned that commercial airline traffic is going to become chaotic as more air traffic controllers, unpaid during the shutdown, call in sick. Already, health plan premiums for 2026 are soaring. And tariff-related inflation is bound to rise.
It’s proper to note that the economy Trump inherited from Biden was strong and getting stronger, notwithstanding Trump’s mantra, articulated during his interview with “60 minutes” broadcast on Nov. 2, that “Joe Biden was the worst president in the history of our country….We had the worst of everything.”
In truth, Biden inherited an unemployment rate of 6.8% from Trump’s first term, and bequeathed second-term Trump a rate of 4.1%, the lowest rate since the election of George W. Bush. Annual job growth fell to negative 6% during Trump’s first term, and Biden brought it up to an average of 1.4%.
Real gross domestic product growth per capita had fallen to an annualized rate of negative 1.8% under Trump 1.0; Biden brought it up to positive 2.1%. The employment-to-population ratio for workers ages 24 to 54 was 76.2% when Biden took over and rose to 80.5% when he ceded the White House to Trump — the highest handover value since 2000, according to the labor-affiliated Economic Policy Institute.
Conservatives took notice. The second term “will begin with the economy on a sound footing, with solid economic growth and healthy labor markets,” Hoover Institution fellow Mickey D. Levy wrote one month before the inauguration.
Levy, like other conservatives, viewed Trump’s impending second term with a certain level of trepidation. Levy expected “the net economic impacts” of policies Trump was expected to impose — “higher tariffs and tough anti-China policies; extending the 2017 tax cuts; deregulation and increasing government efficiency; and deporting immigrants” — would probably fall “somewhere in between the most pessimistic prognostications and the rosy scenario envisioned by the Trump team.”
Levy expected that “the actual policies will be less severe than suggested by Trump’s blustery campaign platform.” In the event, they were more severe.
The strongest headwind against growth is the uncertainty that Trump has imposed on the economy. “There is overwhelming evidence that tariffs have pushed inflation higher for consumers,” Bank of America economic analysts said in a note published Oct. 31. They estimated that consumers have paid as much as 70% of the total tariff cost so far.
Several Supreme Court justices, especially the three members of the court’s liberal wing, noted during oral arguments Wednesday over the legality of Trump’s tariffs that the tariffs are tantamount to taxes imposed on Americans.
“You want to say tariffs are not taxes, but that’s exactly what they are,” Justice Sonia Sotomayor lectured Solicitor Gen. D. John Sauer, representing the White House. “They’re generating money from American citizens, revenue.” (Sauer continually insisted that the tariffs are not a tax, trying to sidestep an argument that would have undermined the government’s case.)
The government also has acknowledged that Trump’s immigration policies — “the near total cessation of the inflow of illegal aliens [and] increased enforcement of existing immigration law” risks “supply shock-induced food shortages.”
For businesses, the effect of Trump’s incoherent economic policy decisions is to freeze their planning in place. A recent poll of corporate chief executives indicates that the business leaders are fully alive to negative trends that may yet be undiscerned by ordinary Americans.
About 71% of the CEOs polled by Yale said that the tariffs were harming their business, 62% said the tariffs weren’t prompting them to invest more domestically and 59% said they expected no results from domestic investment as a result of the tariffs.
Trump has depicted his tariffs in part as an effort to rescue the domestic manufacturing sector from years of competition from abroad. If that’s so, it hasn’t worked. Economic activity in the manufacturing sector shrank in October for the eighth consecutive month, after a two-month expansion at the tail end of the Biden administration, the Institute for Supply Management reported.
The White House maintains that Trump’s will yield appreciable benefits in the future.
“President Trump’s tariffs have secured historic trade deals that level the playing field for American workers and industries with economies that are in total worth over $35 trillion,” White House spokesman Kush Desai told me by email. “Industry leaders have also responded to the President’s tariffs with trillions in investment commitments to make and hire in America. As these investments take effect and ‘Made in USA’ exports blossom across Europe and Asia, Americans can rest assured that the best is yet to come.”
But the signs are that the near future, at least, will be economically bleaker than the present. Taken separately, the administration’s “layoffs of federal workers, mass deportations, constant threats and retractions of broad-based tariffs, and Medicaid spending cuts — would be bad for the economy, EPI Chief Economist Josh Bivens wrote in March. “But each policy is also being pursued with maximum levels of chaos and incoordination, creating unprecedented levels of economic uncertainty. This uncertainty is itself a serious economic threat.”
The one unmistakable positive sign in the economic landscape — a stock market reaching record highs — may be less encouraging than it appears on the surface.
The Standard & Poor’s 500 index, a common proxy for the broad market, is higher by about 16% this year so far, and the tech-heavy Nasdaq is higher by more than 22%. But the gains are concentrated among seven stocks associated with spending on artificial intelligence, and whether they can be sustained is an open question.
Where do we go from here? No economic development is visible on the horizon that might relieve consumers of the feeling that they’re paying more for necessities and that their very livelihoods are under threat. The tariffs are still in place, SNAP benefits not likely to be restored in full for weeks or even months from now, unrestrained immigration enforcement is driving food prices higher.
What Tuesday’s election results show is that consumers are voters. A rational administration would take that as a warning siren and reconsider its policies. This administration? Who knows?
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