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The Economy Was Trump’s One Remaining Advantage. Now He Might Have Blown It.

President Trump was already in a deep electoral hole following the first debate, but one remaining bright spot for him was the economy. So calling on Republican…

President Trump was already in a deep electoral hole following the first debate, but one remaining bright spot for him was the economy. So calling on Republican leaders to end talks with Democrats on another stimulus package — as Trump did on Tuesday — would seem like a bad move for the president, and, in fact, it did send the stock market tumbling.

True, U.S. GDP fell at an annualized rate of 31.7 percent in the second quarter, the largest ever quarterly decline. But Trump’s approval ratings on the economy had remained relatively solid despite this: 51 percent of voters approve of his economic handling and 47 percent disapprove of it, according to the Real Clear Politics average. The economy has also been one of the few issues on which polls regularly find that voters prefer Trump to Joe Biden.

How to explain this seeming disconnect? Well, Trump can actually make some decent arguments to voters about the economy that are grounded in the data. For instance, the economy was pretty good during his first three years in office. And the rebound has been pretty swift. The Atlanta Federal Reserve’s “nowcast” estimates that GDP grew by a 35.3 percent annualized rate in the third quarter, which ended on Sept. 30. That still leaves the economy in worse shape than before the pandemic, but not that much worse.

Trump had also been able to patch a lot of holes in the economy with the series of stimulus packages passed by Congress earlier this year, which injected trillions of dollars into the economy in the form of direct cash payments, expanded unemployment benefits and protections for businesses. Indeed, one of the economic indicators that has historically been among the most reliable predictors of the election — disposable income — sharply increased amid the pandemic because of the stimulus benefits, although it has since fallen as those benefits have lapsed:

The FiveThirtyEight economic index, an element of our presidential forecast, is pretty consistent, too, with Trump’s decent approval ratings on the economy, in part because of that growth in disposable income. Here’s what it said as of Tuesday morning, and as you can see in the table below, three of the six categories we use — income, inflation and the stock market — were actually slightly positive for Trump. That partly makes up for exceptionally poor jobs numbers, and fairly poor pandemic-driven numbers on manufacturing and consumer spending. (The values in our economic index are z-scores, or the number of standard deviations above or below the mean in each category, based on past and projected economic data in the two years in the runup to the election with recent quarters weighted much more heavily.)

The economic news wasn’t all that bad FiveThirtyEight’s economic Index as of 8 a.m. Eastern on Oct. 6, 2020 Category Indicator Z-Score Income Real disposable personal income +0.57 Inflation Consumer price index +0.64 Jobs Nonfarm payrolls -2.39 Manufacturing Industrial production -1.34 Spending Personal consumption expenditures -1.11 Stock Market S&P 500 +0.79 Combined Average of all six indicators -0.47 The values in our economic index are z-scores, or the number of standard deviations above or below the mean in each category, based on past and projected economic data in the two years in the runup to the election with recent quarters weighted much more heavily.

And, overall, if we average the six categories together, the economic index is only about half a standard deviation below…

Nate Silver

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