Democratic presidential candidate Vice President Kamala Harris (left) and Republican presidential candidate former President Trump.
Associated Press
A measure of economic pain with a proven track record in predicting elections is leaning toward a Kamala Harris victory, but it appears to be strained heading into the final stretch of the campaign.
The “Misery Index” is the sum of the U.S. unemployment rate and the annualized inflation rate.
The index currently stands at 7.02, below levels Strategas found to be consistent with incumbent parties losing elections. That number contributed to a slight decline in the unemployment rate to 4.2% in August, as Friday’s jobs report showed.
According to Strategas, the incumbent party (in this case, Harris’s Democrats) would need to be below 7.353 in October to come out on top. The firm found this level through exclusive analysis of the pain index needed for the current ruling party to retain power, based on history.
In other words, a reading below that threshold essentially means voters are not “pained” enough economically to launch the incumbent party.
Daniel Clifton, director of policy research at Strategas, said that in addition to the unemployment rate, lower gasoline prices will also help control economic distress and thus provide aid to Democrats. Still, he called the race “extremely close” in a note to clients on Monday.
Clifton’s comments came ahead of Tuesday night’s debate between Harris and Republican Donald Trump. The event is hosted by ABC News in Philadelphia and is scheduled to begin at 9 p.m. ET.
“Given the intensity of this campaign, we’re seeing them debate and the stakes are high,” he said.
Misery Index trackers will get their next update on Wednesday, with the August Consumer Price Index due out at 8:30 a.m. ET. Economists polled by Dow Jones expected the gauge, which tracks price changes for a broad basket of goods and services, to rise 2.6% compared with the same month last year.
That would mark a decline from July’s 2.9% year-on-year growth rate. It also reflects a broader downward trend in annual inflation from the runaway levels seen early in the Covid-19 pandemic. The Federal Reserve is responsible for setting U.S. monetary policy 2% target Price increases every year.
In turn, the misery index has fallen sharply in recent years as the pace of annualized inflation has slowed. It is worth noting that last year’s misery index was still above the 7.353 threshold.
But if concerns about a cooling labor market portend a rise in unemployment, Harris may now face a challenge. Although the unemployment rate fell slightly in August, market participants were uneasy on Friday as job growth for the month was less than economists expected.
About The Author
