A mixed economic forecast is testing voter sentiment ahead of the midterm elections, with solid GDP growth contrasted by stubborn inflation and elevated borrowing costs. The Federal Reserve kept interest rates unchanged this week, but additional hikes remain possible later this year, raising questions about how the economy will shape the results.
Mixed economic forecast and voter affordability concerns
Affordability remains a pressing worry. The Commerce Department reported September inflation at 3.6 percent, higher than the prior month and higher than it was when President Trump returned to the White House.
With living costs outpacing paychecks, nearly two-thirds of Americans disapprove of the president’s handling of the economy, according to recent polling. Voters punished Democrats for inflation in 2024 and could now deliver a similar verdict on Republicans.
Growth accelerates, but jobs lag
The broader economy picked up in late summer and early fall. Gross domestic product grew at an annual rate of 3.4 percent from July through September, up from 2.2 percent the previous quarter.
Federal Reserve Chair Kevin Warsh called the momentum a positive sign, noting the economy is pointing in the right direction. Much of that growth has been powered by large investments in artificial intelligence, including data center construction.
Despite the faster output, the gains have not translated into a surge in hiring. For markets, a stock-market selloff could ease after midterms, but households remain focused on day-to-day costs.
Labor market shows sluggish hiring
Employers added 29,000 jobs in September, with October figures due this week. Unemployment stands at a low 4.2 percent, yet many workers are hesitant to switch jobs, reflecting weaker confidence.
Chief economist Mark Zandi of Moody’s Analytics said hiring rates remain extraordinarily low, a sign of a labor market that lacks vigor. New data show consumer spending in September rose about two and a half times faster than wages, underscoring why households remain uneasy about affordability.
Housing hit by high mortgage rates
Housing continues to feel the strain of higher mortgage costs. Even with the Fed holding short-term rates steady, longer-term borrowing costs remain elevated.
The average 30-year fixed rate sits around 7.25 percent, sidelining many would-be buyers. Zandi said he had hoped rates might settle near 6 percent to revive sales, but with rates well above 7 percent, the most interest rate sensitive sector of the economy is taking it on the chin.
Residential investment has subtracted from GDP in eight of the last 10 quarters, reflecting the market’s prolonged cooldown. For voters weighing pocketbook issues from gas and groceries to homebuying, the split-screen economy poses a difficult calculus just days before ballots are cast.
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