- By most economic metrics, American businesses are staging a remarkable rebound from the Covid-19 recession. But Americans don't feel good about the economy.
- In a recent NBC News poll, 57% of American said they disapprove of President Joe Biden's handling of the economy.
- Democrats and Republicans agree that one economic phenomenon working against Democrats' odds in 2022 is the recent rise in prices.
- Democrats will try to persuade voters on a political gambit: That investments in infrastructure and antipoverty programs are worth temporary inflation.
By most economic metrics, American businesses are staging a remarkable rebound from the Covid-19 recession. But ask the people themselves, and Americans tell you they aren't feeling so peachy.
Employers added more than half a million jobs in October, the unemployment rate is under 5% and spending across the economy is returned to its pre-coronavirus trend. The average hourly wage in the U.S. is up nearly 5% from a year ago, and the S&P 500 is up 39% since President Joe Biden's election in 2020.
But for all the good news, Americans still feel like the economy is going downhill.
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That is a problem for Democrats, who are trying to hold on to razor-thin majorities in both the House and the Senate. That's in addition to the usual uphill climb faced by a president's party heading into a midterm election cycle, when the incumbent's side often loses seats.
In a recent NBC News poll, 57% of American said they disapprove of Biden's handling of the economy, while just 40% said they approve. Meanwhile, an October Gallup study showed that 75% of Americans rate current economic conditions in the country as only fair (42%) or poor (33%), while 68% say the economy is worsening. Other polling shows that inflation and economic concerns are outpacing worries about Covid.
Democrats and Republicans agree that one economic phenomenon working against Democrats' odds in 2022 is the recent rise in prices. As such, Democrats are expected to be laser-focused on their legislative achievements when they take to the campaign trail in 2022.
In essence, the party will try to persuade voters on a political gambit: That historic investments in infrastructure, antipoverty programs and climate initiatives are worth pesky but temporary inflation, says Raymond James Washington policy analyst Ed Mills.
"Democrats are likely facing those headwinds regardless of what they do, so they are looking to arm incumbents with a list of accomplishments," Mills wrote in an email.
Democrats hope their recent legislative successes including the $1 trillion infrastructure package will help ease any resentment voters feel about rising prices, which has in recent months driven up the cost of everything from gasoline to groceries.
Wages may be up 4.9% on a year-over-year basis, but the Labor Department's consumer price index — one of the most popular inflation gauges — was up 5.4% in the 12 months ending in September. That is about the same rate as seen in June and July, all of which are the highest in over a decade. The government is scheduled to release October 2021 CPI data on Wednesday.
That means that many Americans have seen their real wage and purchasing power decline over the past 12 months. Many simply cannot buy as many gallons of gas, cartons of eggs or barrels of home heating oil as they could one year ago.
The national average per-gallon price of regular gasoline is $3.41, up about 40% from $2.42 in February 2020, according to the Department of Energy.
That's why the Biden administration, and every Democrat hoping to win election in 2022, is preparing to meet that inflation pessimism with a list of reasons they think voters should feel better than they do.
Democrats who spoke to CNBC said they plan to counter concerns about rising prices by pointing out steady improvements to the supply chain, better wages and greater access to child care.
"As the country recovers from a once-in-a-century pandemic and economic crisis, the private businesses that make up our supply chains, which get goods to businesses and the American people, have struggled to keep up," a spokesman for the Democratic National Committee told CNBC via email.
Economists say the current rash of inflation stems from a mismatch between robust demand and an insufficient supply of goods the result of logistical hiccups and labor shortages. The White House last week published the first of several reports on the current state of the U.S. supply chain, an effort the administration is taking to track the nation's transportation and logistics.
The administration announced Tuesday efforts to ease some supply-chain issues in the next two months.
Those included directing the Department of Transportation to allow port authorities to redirect project cost savings toward tackling supply-chain challenges, and launch programs to modernize ports and marine highways with more than $240 million in grant funding over the next 45 days.
"While we experience this temporary pain, and expect things to improve with the passage of President Biden's agenda, we've seen some positive signs, including that wage growth is outpacing inflation, especially for those Americans who had the most insecure jobs and the lowest wages," the DNC spokesman added.
Wages for those employed in the leisure and hospitality industry, which saw some of the ugliest layoffs during the spring of 2020, are in the middle of a robust rebound as hotels, resorts and restaurants scramble to hire. Workers in that sector have seen their average hourly earnings rise to $19.04 from $17.12 one year ago, a more than 11% increase.
A few sectors with wages outpacing inflation haven't deterred Republicans from homing in on the broader inflation problem and warning that even more fiscal stimulus could make the problem worse.
"Biden's Build Back Broke agenda has led to skyrocketing prices, a supply chain crisis, a slowing economy, a worker shortage, and weak job growth," Republican National Committee Chairwoman Ronna McDaniel said in a press release on Oct. 28. "Trillions more in wasteful spending and higher taxes will only further hurt the middle class and recovering small businesses."
Virginia voters appeared to have heeded that warning on Nov. 2, when Republican Glenn Youngkin defeated Democratic former Governor Terry McAuliffe in that state's gubernatorial election. Youngkin's victory in Virginia, which Biden won by a healthy 10 points in 2020, is being seen as a de facto playbook for the rest of the party heading into 2022.
"We must continue to focus on the failures of the Biden economy," Rep. Jim Banks, R-Ind., wrote in a memo following the Virginia election results. Banks is chair of the Republican Study Committee, a group of the most conservative House Republicans.
"Youngkin focused on providing relief to runaway inflation caused by the Biden economy and on not locking down the economy again," he added. "Our early focus on runaway inflation and the growing supply chain crisis is hitting home with voters. We need to keep hammering away and work on bringing solutions to the table to address their concerns."
Democrats argue that both the $1 trillion infrastructure and the $1.75 trillion Build Back Better bills will help ease those supply chain issues. The House passed the bipartisan infrastructure bill last week, sending it to Biden's desk, after party progressives and centrists made a nonbinding pact to approve the social-spending plan later in November.
"If you are worried about inflation, it's important to understand why it's happening: supply chain, labor, and healthcare complications," Rep. Alexandria Ocasio-Cortez, a member of the Congressional Progressive Caucus, wrote in a Twitter post on Thursday.
"My family is one of essential workers: school bus drivers, postal workers, cleaners, etc," she added. "When childcare wasn't available, my family couldn't work – they stayed home. When childcare isn't universally available, it impacts the labor market. It can become a supply chain issue!"
Raymond James analyst Mills says that, at the end of the day, Democrats are making a wager.
The big bet is that the promise of more efficient ports and highway systems, along with greater access to child care, will help bring workers back into the labor force, ease inflation, and win over a population that does not feel helped.
The upside for Democrats is they have some time. Inflation could relax, supply chains could come back to full capacity and the positive effects of their legislation could begin to make an impact on voters before the 2022 midterms.
"They are hoping to point to SALT tax relief, extension of the Child Tax credit, extended childcare support, down-payment assistance for housing, as ways the reconciliation provides tangible benefits and a net tax cut for most households," Mills wrote. "Whether or not this moves the needle with voters is the bigger debate."