In this news, we discuss the Analysis: Trump or Biden, new U.S. president faces troubled economy.
(This story from November 4th has been uploaded to correct the links to the stories)
(Reuters) – It is still unclear whether the next US president will be Donald Trump or Democratic challenger Joe Biden, but whoever does triumph will face monumental challenges on the economic front.
The recession has been ugly. It wiped out more than a year of economic output and more than five years of job growth.
The workforce is now smaller than it was a year before Trump came to power.
(GRAPHIC – The labor market deficit 🙂
One bright spot – consumer spending – is stronger than it was just after the pandemic exploded in March, but still only returns to its level of last June.
House prices are on the rise, which is good for US homeowners, but at the same time exacerbates the affordability crisis for potential buyers.
Manufacturing activity – a major concern in the Midwestern battlefield states – has rebounded, but manufacturing employment is worse off than employment as a whole.
(GRAPHIC – Manufacturing earnings 🙂
And the coronavirus continues to increase in most of the United States. Nearly 6,000 people died last week, and there are growing fears that the United States needs to restore lockdowns that have occurred across Europe in order to bring them under control.
But despite signs the economy has started to slow again amid yet another viral attack, “the economy is almost certain to improve during 2021,” says Jason Furman, key economic adviser to Barack Obama, the last elected US president. in times of economic crisis.
The end of 2021 is still a long way off, not only in political terms, but for those living between paychecks or without work.
Projections by Federal Reserve policymakers put unemployment at 5.5% by the end of next year – worse than 4.7% when Trump was first elected, but an improvement over 7.9% current.
Beyond job losses and reduced economic output, Trump or Biden will face a list of long-term headwinds, including deepening inequality, growing federal debt, and shattered international trade relations.
As the election approaches, Trump has consistently polled better than Biden on his ability to create jobs and run the economy, if not the virus.
But even with the election outcome uncertain, and likely to remain so for some time amid legal challenges, stock investors love what they see.
This is in part because Republicans seem likely to keep their grip on the Senate, leaving political priorities relatively unchanged if Trump is the winner, or as a preemptive force for a President Biden to try to do. make big policy changes if it came first. the urn.
It’s also because Senate Majority Leader Republican Mitch McConnell signaled on Wednesday that he was open to a new coronavirus aid bill during the ‘lame duck’ session before the swearing-in of elected members of the US Senate and House of Representatives.
For the still weak economy, a lot will depend on the timing, size and form of a pandemic relief program, which eluded lawmakers and the White House before the election.
A more modest budget package could mean that “the outlook for growth and corporate profits may not be as strong as expected,” said James Knightley, ING’s chief international economist.
A Biden presidency with a majority Republican Senate could offer the worst-case scenario for the economy in 2021, as Republicans are likely to oppose a substantial stimulus package, said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.
That would be bad news for the millions of low- and middle-income Americans who are unemployed and struggling to find jobs in industries such as travel and entertainment who will likely remain moribund until the pandemic is better controlled.
A scenario in which Trump is re-elected and the Senate remains under Republican control could potentially result in more stimulus, as Trump has argued for more stimulus and could have more influence if re-elected, Luzzetti said.
Whatever the outcome of the election, any aid package should provide additional aid to the unemployed, help for small businesses and assistance to state and local governments, in order to keep the economy going, Luzzetti said.
Report by Ann Saphir and Jonnelle Marte; Editing by Heather Timmons, Paul Simao and Edward Tobin
Original © Thomson Reuters