Happy Monday. It’s vibe check time. Vice President Kamala Harris and former President Donald Trump will begin their last full month of campaigning later this week, and with that in mind, your MM host thought it might be useful to tick through a few of the economic realities that could shape voter perceptions in the final innings. No. 1: The jobs market — The single biggest economic question mark between now and Election Day is the state of the labor market. The Labor Department will provide its monthly update on unemployment and non-farm payrolls on Friday. The August tally was weak by recent standards, reflecting anemic growth through the summer. If unemployment climbed in September — or if revisions further dent previously reported payrolls — it could roil markets and create unwanted challenges for Harris, who’s running as an advocate for Joe Biden’s economic policies. The unemployment rate was a healthy 4.2 percent last month. But the momentum that powered the labor market through an era of high prices and high borrowing costs has faded. Businesses are not hiring workers at the same clip and there are fewer available openings. That can weigh on both consumer spending (more on that in a moment) and voters’ economic perceptions. The Conference Board’s monthly consumer confidence index fell in September as concerns mounted over the state of the jobs market. The decline was sharpest for low-income individuals and people aged 35 to 54 (i.e., those most likely to be in the middle of their careers). Of course, the labor market is not the last word for how people form their opinions about the economy. Even if it were, it’s important to note that we have not seen levels of layoffs or downsizing that would typically signal a slump. (Indeed, the economy expanded at a very healthy 3 percent clip from April to June, according to Commerce Department data released last week). The University of Michigan’s widely cited consumer sentiment survey improved in September, a reflection of “greater optimism across a broad swath of the population,” survey Director Joanne Hsu wrote Friday. While the Conference Board’s survey focuses more on labor market conditions, Michigan asks more specific questions about personal finances. Whatever trepidation voters may have about the state of the labor market hasn’t hurt Harris. The University of Michigan survey has her running ahead of Trump on the question of which candidate would be better for the economy, and they’re neck-and-neck on the question of who would be best for personal finances. No. 2: Inflation — Have you heard the good news? It has fallen. The personal consumption expenditures (PCE) index on Friday showed that annual inflation has fallen to 2.2 percent, which is within shouting distance of the Fed’s 2 percent target. The Fed’s half-point rate cut earlier this month — along with Chair Jerome Powell’s comments about how “this is still a solid labor market” — is the closest we’ll come to seeing a “Mission Accomplished” banner flying above the Eccles Building. Of course, voter dissatisfaction with high prices will remain a major factor in the 2024 campaign. That’s why Harris has trumpeted her plans to go after corporate price gouging, and why Trump continues to hammer at the Biden-Harris administration over the price surges that occurred on their watch. No. 3: Pocketbooks — Lower inflation should provide a boost to Americans whose monthly paychecks have caught up with higher prices. Alas, as I pointed out above, a softening labor market typically causes consumer spending to soften. On Friday, the Commerce Department said real consumer spending grew by just a tenth of a percentage point last month, “as households remain smartly prudent in the face of high prices … and cooler labor market conditions,” EY-Parthenon chief economist Gregory Daco said. Still, overall retail sales have remained surprisingly robust, which bodes well as we get closer to the holiday season, when spending typically accelerates. And the number of Americans who reported making large purchases actually grew during the spring and summer, according to a recent New York Fed survey, which is usually a sign that consumers are confident in their ability to spend. No. 4: Markets — The Fed’s decision to lower interest rates, coupled with economic data indicating the economy remains on healthy footing, has sent stocks close to record highs in the final days of the third quarter. The S&P 500 index is on track to chart its best January-to-September performance since the Clinton administration, Reuters reported Friday, and companies have flocked to the capital markets to issue new shares and raise debt — which could facilitate expansion, dealmaking and new hiring. Uncertainty around the outcome of the election could slow some of that momentum in the near term, however. Almost 90 percent of the 400 U.S. CEOs recently surveyed by KPMG said they had “a moderate or high appetite for M&A.” But 46 percent are holding off on any significant investment decisions until after the elections. And the Business Roundtable’s quarterly check-in with leaders of the country’s largest companies found that hiring plans have moderated, which seems “to be consistent with the Fed’s perspective on a softening economy,” the industry group’s CEO Joshua Bolten said. IT’S MONDAY — Your host will be covering tomorrow’s vice presidential debate between Ohio Sen. JD Vance and Minnesota Gov. Tim Walz. If you’re on Wall Street or in the economic policy world, what are the questions you want answered? Send ‘em my way to ssutton@politico.com.
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