There is extraordinary good economic news that the Democrats are not talking about.
Biden and the Democrats are presiding over the strongest two-year performance on growth, jobs, and income in decades. Federal Reserve Chair Jerome Powell and Wall Street economists show confidence in the future months, so long as the current cycle of inflation eases, and the Omicron variant does not trigger another round of shutdowns.
- In the first three quarters of the year, real GDP increased at 7.8% (adjusted for current inflation); the Fed expects real growth at 5.9% by the end of 2021, followed by another 3.8% increase in 2022. The gains are extraordinary.
- From January 20, 2021, to December 7, the S&P 500 grew 21.7%.
- From January to October, disposable income grew 3% after inflation.
- From January to November, the jobless rate fell by one third. After the Great Recession, it took six years for the jobless rate to fall by one third.
- Right now 45% of households are saying inflation costs are an economic strain, with price increases mainly affecting food and gasoline. But gas prices have dropped 20% over the last 3 weeks, and are tied to supply bottlenecks and labor issues.
Americans last experienced this type of inflation in 1946–47, when bottlenecks and shortages arose from the economic restructuring required to pursue years of total war. This time, logistical adjustments should address many of the supply chain issues over the course of a few months. Accordingly, Federal Reserve Chair Jerome Powell says he expects broad price increases to ease substantially over the next six months. Financial markets agree: The yield on 10-year Treasury bonds was less than 1.5 percent this week, which is lower than in mid-February, before prices began to accelerate.
If investors are right, conditions for a strong economy in 2022 are falling in place.
- Personal savings rates are high
- Employment and wages will continue to climb
- Infrastructure projects will bolster growth, jobs, and income
Economists at Goldman Sachs, Evercore ISI, Morgan Stanley and J.P. Morgan have all written in recent weeks that they believe it’s a matter of time until the Senate passes Biden’s Build Back Better legislation.
That could mean a business boom for some of the country’s biggest construction and materials companies, they say.
“Nothing in DC is 100% sure, but I think the odds are very high, I’d say 80-90% that we get some sort of BBB,” Mike Feroli, chief U.S. economist at J.P. Morgan, told CNBC.
So, if the economy continues to improve as economists expect, people will come to believe again. In that case, the midterm elections could well unfold during a formidable Biden boom, which certainly would be good news for the Democrats.