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Yves here. We are heavy on politics tonight because truth be told my WiFi went down, my hotspot isn’t working and I am scarfing bandwidth at the local JCC. This being the South, Starbucks, the other backup, are down too. Terrible to have this happen in the middle of the fundraiser of all times, but a reminder of how fragile our personal infrastructures can be.
Substantively, this post assumes that employment will continue to improve. That picture depends on how Covid behaves over the winter. But it also misses that consumer sentiment has fallen considerably, and if that holds, it creates its own reality.
By Barkley Rosser, Professor of Economics at James Madison University in Harrisonburg, Virginia. Originally published at EconoSpeak
On the first page of today’s Washington Post was reported a poll showing that when a random sample was asked, 46% said they would vote for a generic Republican candidate for Congress versus 43% for a generic Democratic candidate. Given reported further pro-GOP gerrymandering, if this were to hold for next year’s midterms, GOP would certainly take solid control of the House, if not the Senate. Not looking good for the Dems or Biden and Harris.
Now there certainly some things that are not looking good. Covid-19 cases have started to increase again, if not dramatically, but in 35 states at latest report, and deaths seem to have stopped declining, if not started rising again. Of course, it may be that given that we now have 80% of adults having had at least one vax shot, we may be able to handle some increase in cases without hospitalizations and deaths rising, given that over 90% of those in hospitals and dying are unvaxxed. But this is something Biden has emphasized and worked hard on, with bad news appearing, even if this is partly due to bad non-behavior (getting vaxxed, wearing masks) among his critics.
Probably foreign policy is not part of the most recent decline, but the messy nature of the end of the Afghan war dropped Biden’s ratings by about 5% some months ago, damaging his previously generally favorable foreign policy rating. That is probably not that big a deal now, although the damage seems not to be undone, despite an apparently generally successful trip to the G20 and the Glasgow summits.
It may be that the whole noise about education and CRT spilling out of the Virginia governor’s race is adding to the Dems’ problems, but more clearly serious problem, dominating the headlines, is inflation, with the recent year to year 6.2% annualized rate report for October probably the punctuation point for today’s especially poor poll ratings. This couples with reports of impending Christmas shortages, including even for Santas, with none of this looking good. It remains unclear fully what is going on with some of these shortages, such as ports and truckers, and so on, but problems with these are now entrenched with not much improvement in sight, not to mention ongoing chip shortages pushing up prices in in the auto industry. And this price spike was especially led by energy, with rising gasoline prices in Virginia reported to have been a factor in the GOP governor’s race win, and that was something I heard a lot about just prior to the election here.
So there are certainly things that look bad or actually are bad out there on various fronts. But do they really justify these bad polls? Do people really want to elect people who are currently running around trying to kowtow to Donald J. Trump as hard as they can? There were reports about the Glasgow climate summit, but much of that got undercut by reports that it was just going to exacerbate oil and gas prices. Real climate activists found it insufficient, and others found it inflationarily scary. Ugh.
Anyway, there is a lot that looks plenty good. One is the employment front. While it has not yet gotten back to pre-pandemic levels, it continues to rise and there has been upward movement of wages. In September we had an all-time record number of quits, which presumably indicated people feeling so confident about getting a better job they quit their current job. These people are not quitting to drop out of the labor force, or not most of them, although there remain s aubstantial number of people out of the labor force for a variety of reasons, and there are still some unemployed who are having trouble getting re-employed. So this is not perfect, but mostly massively improving and mostly quite good.
Then we have the stock market, which Trump claimed would crash if Biden were elected. It did decline from all-time highs this past week, but the Dow still remains above the famous Glassman-Hassett level of 36,000. This is in the eyes of many still a rather overvalued market, certainly not one that has crashed. But, of course, lots of people are not so directly affected by the market.
Furthermore, Biden just signed the hard infrastructure bill today, something most polls show is highly popular, and which even drew some GOP support in Congress, although GOP leaders and Trump are out to purge or punish those who did vote for it. Unfortunately, the Dems have done a poor job of publicizing this achievement and what is in it. Obviously they need to do more on that, although we know all sorts of GOP Congress members will brag about parts of it delivering money to their states and districts, even though they voted against it.
Finally, although there seems to be zero media recognition of this, it looks like the big surge of gasoline prices may be over. Crude oil prices have declined over the last three weeks from about $85 per barrel to about $80 per barrel, and crude prices are the main driver of retail gasoline prices with a lag. Indeed, although I have not seen national data, it looks like gasoline prices may have stopped rising at all in recent weeks, with it possible they may even decline a bit, if crude prices do not return to rising again. Where I am this has happened, a freeze at $3.29 per gallon with a 5 cent drop over the weekend. None of this is in the news, just more talk about rising gasoline prices. We shall have to see on this, but there may be a substantially lower inflation report next month. If so, will anybody notice, or will we start hearing about some other supposed horror?