It's Still the Economy, Stupid

Jon Gingerich

Financial news is a lot like the weather. “If you don’t like the weather,” Mark Twain famously quipped about New England’s notoriously temperamental temperature swings, “just wait a few minutes.”

It seems like forever ago—in actuality, it was late July—that the country received some great news when the Commerce Department announced that the economy—as measured by Gross Domestic Product—had expanded by 2.8 percent in 2024’s second quarter, exceeding most economists’ expectations and double the rate recorded during this year’s first quarter.

It was the latest sign yet that our economy was on the rebound. And with hourly wages up, productivity outpacing expectations in 2024’s second quarter—meaning businesses made more money in fewer hours—and inflation continuing to cool from its 2022 peak, all signs suggested that the U.S. may have dodged a recession and was on track for a soft landing, a theory that was confirmed when Federal Reserve Chair Jerome Powell signaled in response to the unexpected GDP news that interest-rate cuts might finally be on the table in September, the first such cut in four years.

All reasons to celebrate, of course. Lower interest rates make it cheaper to borrow money from banks or get a mortgage, which means increased spending from businesses and consumers, which means more jobs, and so on. This was also obviously fantastic news for the Harris camp, which could campaign on the fact that the administration it was inheriting had presided over the greatest financial turnaround in recent history after the abysmal COVID years, effectively deflecting one of Trump’s most successful lines of attack in the process.

This article is featured in O'Dwyer's Aug. Financial PR/IR & Professional Servcies PR Magazine

Well, not so fast. The reality is that, while the U.S. economy isn’t as fragile as many assumed, it isn’t exactly in tip-top shape either. Lo and behold, the Labor Department in early August announced that U.S. employers had added a paltry 114,000 jobs in July—a far smaller number than most expected—and our unemployment rate rose to 4.3 percent. As a result, the news sent the stock market tumbling, witnessing its worst daily dump in nearly two years—and now renewed fears of a recession are back on investors’ and consumers’ minds.

Obviously, this wasn’t the news we were hoping for. And yet, most Americans are well aware of the fact that the U.S. economy remains on shaky ground. We’ve known for a while that Americans have had a habit in recent years of discounting whatever good financial news comes their way and focusing instead on the bad. With inflation still sitting at a stubborn 23-year high and cooling at a rate slower than we would like—and with lingering effects such as consumer prices that remain significantly higher than they were just a few years ago—it’s hard for them not to.

Indeed, a series of recent reports suggest that Americans remain financially guarded, price-sensitive and generally pessimistic regarding the state of the US. economy—a fact that poses serious challenges for the Harris campaign and should serve as a reminder for where the campaign should focus its messaging if Harris wants to win the presidency this November. Like James Carville famously said back in 1992: "It's the economy, stupid."

A recent survey by retail data science platform 84.51°, which polled Americans about their shopping habits, suggests that consumers are more anxious about inflation than ever, as two-thirds of shoppers (66 percent) reported being concerned about inflation, compared to only 61 percent recorded during the same time last year and the highest percentage recorded by 84.51° since March 2023.

As a result of these fears, the 84.51° report confirms what most Americans already know: Shoppers are still modifying their purchasing behaviors and are regularly hunting for deals, suggesting that value messaging remains a winning strategy for food and retail marketers for the foreseeable future. Nearly two-thirds (64 percent) of shoppers said they now look for sales and coupons more often than previously. More than half (54 percent) reported switching to lower-cost, off-brand items. More than half (51 percent) of shoppers said they’ve cut back on non-essential items like snacks and candy and the same percentage indicated that they plan to eat at home more often in the coming months. Nearly half (44 percent) said the state of the economy has compelled them to purchase fewer items during their grocery trips altogether, and a third (33 percent) said they’re now cooking items at home either from scratch or with pre-prepared foods.

The fact is that the labor market and the economy at large remain far weaker than the big numbers in the financial news cycle had led us to believe. This is the economic climate that Harris is potentially inheriting—and we know that jobs and the economy are key issues for American voters—yet as I write this, her campaign’s messaging hasn’t mentioned much of anything in the way of a plan regarding how she plans to fight a potential slowdown. That needs to change STAT. Incumbent administrations presiding over a healthy economy statistically fare well in elections, but it’s becoming increasingly obvious that this won’t be the environment Harris inherits. Harris needs to pivot and focus on jobs, inflation and what she plans to do to strengthen the U.S. economy long term. If she doesn’t, Trump’s ramblings about a looming financial collapse will be the message that Americans remember this November.