The economic misery index, which combines the unemployment rate and inflation rate, has a history of accurately predicting election outcomes and currently favors a victory for Kamala Harris. The index is currently at 7.02, below the level typically associated with the incumbent party losing the election. In order for the Democrats, led by Harris, to secure a victory, the index needs to fall below 7.353. This indicates that voters may not be dissatisfied enough with the economy to vote out the current administration.
Factors such as falling gasoline prices are helping to keep economic hardships manageable, which could benefit the Democrats in the upcoming election. However, the race is still considered to be extremely close, according to Daniel Clifton, the head of policy research at Strategas. Ahead of the debate between Harris and Republican candidate Donald Trump, Clifton emphasized the significance of the upcoming event due to the tight nature of the race. The debate is scheduled to take place in Philadelphia on Tuesday night.
The next update on the misery index is expected on Wednesday with the release of the consumer price index for August. Economists anticipate a 2.6% increase in prices compared to the previous year, reflecting a slight decline from the previous month. This downward trend in inflation is a response to the high levels observed during the early stages of the Covid-19 pandemic. The Federal Reserve aims for a 2% annual rate of price growth.
The recent decrease in the misery index can be attributed to the cooling inflation rate in recent years. However, Harris could face challenges if there are concerns about a potential rise in the unemployment rate. While the August jobless rate saw a slight decrease, the slower-than-expected growth in payrolls during the month caused some unease among market participants. If these trends continue, it could impact Harris’s chances in the election, especially if the unemployment rate increases.
In summary, the economic misery index, a reliable predictor of election outcomes, currently suggests a potential victory for Kamala Harris. Factors such as falling gasoline prices have helped to keep economic hardships manageable and could benefit the Democrats in the upcoming election. However, the race is still considered to be extremely close, with the next update on the index expected following the release of the consumer price index for August. Despite recent improvements in the index, challenges remain, particularly if concerns around the labor market and unemployment rates persist. The outcome of the election could ultimately hinge on how these economic factors play out in the final stretch of the campaign.
