In an effort to keep Bill Clinton’s 1992 run for president focused on its key messages, the campaign’s lead strategist, Jim Carville, stressed that “it’s the economy, stupid.”*

It’s not a very friendly way to put it, but Carville was trying to make it crystal clear that the economy matters to voters.

And while the economy is by no means the only thing on the minds of Americans on this election day, Carville’s dictum still carries weight. A recent Gallop poll, for example, found that “the economy ranks as the most important of 22 issues that U.S. registered voters say will influence their choice for president.”   

With this in mind, here are some observations about the current state of the U.S. economy:

• Overall, it’s doing very well. After an increase of 2.9% in 2023, our latest forecast pegs real GDP growth at 2.6% this year—more than double what we expect for Canada. The IMF now forecasts a 2.8% gain in 2024. This is much different than in 1992 when Clinton and Bush were battling it out during a major recession.
• GDP growth, moreover, has been accompanied by relatively strong job growth and low unemployment. Admittedly, the unemployment rate has ticked up to 4.1% as of October from an average of 3.6% in 2022 and 2023, but it remains below the five-year average set before COVID.
• As in Canada, the U.S. has been waging a multi-year battle against inflation with higher interest rates the main weapon in play. But the recent news is positive with the inflation rate coming down  and the U.S. Federal Reserve at the front end of an interest rate reduction cycle.
• At the same time, markets are up (the S&P 500 stock price index is 20% higher than at the start of the year).

It all sounds pretty positive. And yet, surveys show that Americans do not feel that upbeat about the economy.

For example, according to the Pew Research Centre, “fewer than a quarter of Americans (23%) currently rate the country’s economic conditions as excellent or good, while 36% say they are poor and about four-in-ten (41%) view conditions as “only fair.” While positive ratings of the economy have slowly climbed since the summer of 2022, there has been a slight drop since the start of the year – when 28% rated economic conditions as excellent or good.”

The University of Michigan’s Consumer Sentiment Index provides another example. As the chart below shows, although consumer sentiment in the U.S. is above the low point reached in 2022, it is well below its pre-pandemic level and lower than one would expect given low levels of unemployment.

Why this is the case is an extremely complex question with everything from perceived financial status and personal expectations to cumulative price growth and regional variations in the cost of living and employment affecting the results.

With that said, the ongoing impact of higher prices and borrowing costs is likely a key factor. While the inflation rate has eased, consumer prices are 15% higher in September 2024 than they were in September 2021 and the policy interest rate remains 4.75 percentage points higher than it was during the pandemic.

This looks to be a close election and we may not know with certainty the final outcome tonight. That said, tomorrow’s Twenty-Four will provide some initial thoughts on what the results may mean for the Alberta and Canadian economy building off last week’s The Seven.

*The campaign's other two key messages were "change vs. more of the same" and "don't forget health care."

Answer to the previous trivia question: The next U.S. Presidential Inauguration Ceremony is scheduled for January 20, 2025.

Today’s trivia question: Not including the pandemic years, when was the last time the U.S. unemployment rate was 10% or higher?