Former President Donald Trump's recent hope for an economic downturn before potentially reclaiming the presidency next year seems increasingly unlikely, given the string of positive economic reports emerging.
This week alone, the U.S. economy has demonstrated remarkable resilience with substantial job growth, lower mortgage rates, steady inflation rates, and further indications from the Federal Reserve that the cycle of rate hikes may have concluded. Those developments offer a contrast to Trump's predictions of doom, especially his recent remarks on Lindell TV, where he expressed hope for an economic crash within the next year, aiming to avoid a presidency marred by economic turmoil akin to Herbert Hoover's era.
Amid an election year charged with political rivalry, the surge of favorable economic data presents a challenge to Trump's campaign strategy. With employers adding an unexpected amount of jobs in January and the Fed's decision to maintain interest rates signaling a stabilizing economic environment, optimism runs high for the U.S. economy, undermining Trump's critique of Biden's economic policies.
Newsweek has reached out to the Trump campaign for comment by email.
What Happened This Week
The U.S. economy kicked off the year on strong footing, as employers added 353,000 jobs in January, far exceeding the anticipated 185,000. The surge underscores the economy's resilience amid prevailing high interest rates. The diversity of job growth across sectors like professional and business services, health care, and retail, reinforces the narrative of a robust and growing economy. With the unemployment rate holding steady at 3.7 percent (economists predict the year will end with a 4.2 percent unemployment rate), the labor market's strength signals a potential soft landing, challenging the grim forecasts often highlighted by Trump's campaign rhetoric.
Jobs aside, the Fed this week maintained its interest rates at 5.25 percent to 5.5 percent, suggesting a cautious optimism about the economic trajectory. The decision, against the backdrop of inflation cooling from 40-year highs, suggests a strategic pivot towards stabilizing the economy without throttling growth. The Fed's stance, coupled with Chair Jerome Powell's remarks on the economy's solid performance, offers Biden a favorable economic narrative, Newsweek previously reported.
Mortgage rates, too, are on the decline. The 30-year fixed rate edged down to 6.63 percent from 6.69 percent, giving the housing market a sigh of relief. The slight decrease may spark a spring revival in the housing market, buoyed by the anticipation of further rate cuts. The Fed's nuanced approach to inflation and interest rates seems to be fostering an environment conducive to growth and stability, which further undermines Trump's critical stance on an economic crash in the next 12 months.
December's Personal Consumption Expenditures (PCE) index, a key inflation measure favored by the Fed, showed a year-over-year increase of 2.6 percent, signaling a deceleration in inflation. That slowing inflation, coupled with robust consumer spending, points towards sustained economic health. The nuanced drop in durable goods prices and the moderate increase in services and nondurables prices reflect a normalization of the post-pandemic economy, aligning with the Fed's goals for inflation control.
Soft Landing In-Bound?
The U.S. economy's 3.3 percent GDP growth in the last quarter of 2023, amid forecasts of a recession, points to its unexpected resilience. The growth, driven by consumer spending and nonresidential investment, suggests a soft landing may be achievable.
With the Fed hinting at future rate cuts, the economic outlook remains positive, challenging the narrative of decline favored by Trump's campaign.
As the U.S. economy exhibits strength with job growth and inflation control, economist Claudia Sahm's perspective offers a political lens, suggesting to Newsweek that regardless of economic outcomes, Trump might either criticize or take credit for the current economic situation.
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Aj Fabino is a Newsweek reporter based in Chicago. His focus is reporting on Economy & Finance. Aj joined Newsweek ... Read more
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