The economic misery index, which combines the unemployment rate with the annualized inflation rate, is favoring a potential Kamala Harris victory in the upcoming election. This index has accurately predicted 15 out of the past 16 presidential races since 1980. Currently, the index stands at 7.02, below the level that typically indicates a loss for the incumbent party. For the Harris-led Democrats to win, the index will need to fall below 7.353 in October, according to analysis by research firm Strategas. This suggests that voters may not be “miserable” enough with the economy to remove the sitting party.
Factors such as falling unemployment rates and gas prices are helping to keep economic concerns at bay, potentially benefiting the Democrats. However, despite these positive indicators, the race is still reported to be “extremely close” by Daniel Clifton, the head of policy research at Strategas. The upcoming debate between Harris and Donald Trump is expected to be significant given the tightness of the race. The debate, hosted by ABC News in Philadelphia, presents high stakes for both candidates as they vie for the presidency.
The next update on the misery index is expected to come after the release of August’s consumer price index data, with economists forecasting a 2.6% increase compared to the previous year. This represents a decline from July’s rate of 2.9%, indicating a broader downward trend in annual inflation. The Federal Reserve’s target for yearly price growth is 2%, and recent trends suggest a cooling in annualized inflation following the peaks seen during the early stages of the Covid-19 pandemic.
Recent years have seen a significant decline in the misery index as inflation rates have moderated. Notably, the index was above the threshold for a potential incumbent party loss just last year. However, concerns about a potential increase in the unemployment rate could pose challenges for Harris if the labor market cools. Despite a slight decrease in the jobless rate in August, lower-than-expected payroll expansion during the month has caused unease among market participants leading up to the election.
Overall, the economic misery index is currently favoring a potential victory for Kamala Harris in the upcoming election. Factors such as falling unemployment rates and gas prices are contributing to a relatively positive economic outlook for the Democrats. However, the race remains tight, with the potential for shifts in the labor market to impact the final outcome. The upcoming debate between Harris and Donald Trump is expected to be crucial given the close nature of the race, with continued monitoring of economic indicators as the election approaches.
