Biden Gets Bad Economic News as Polls Spell Disaster

American consumers expect inflation to stay elevated through 2024, a survey of consumer sentiment said on Friday, adding more bad news to President Joe Biden's re-election efforts as voters continuously give the incumbent negative marks on his handling of the economy.

In 2024, consumers anticipate inflation to hit 4.4 percent and, over the next five to ten years, they expect it to be at 3.2 percent, the highest reading in more than a decade, the University of Michigan Survey of Consumers said. The long-run outlook for the economy also dropped amid concerns over an environment of high interest rates.

"The combination of expectations for persistently high prices, high borrowing costs and labor market weakness does not bode well for the prospect of continued strength in consumer spending and economic growth," Joanne Hsu, director of the survey, said in a statement shared with Newsweek.

The worry about inflation is the latest evidence of anxieties Americans have over the economy, illustrating the challenge ahead for Biden in convincing voters he deserves a second term.

Polls have recently been showing that a majority of voters think the country is headed in the wrong direction. A recent survey from The New York Times/Siena College conducted from October 22 to November 3, with a sample size of 3,662 registered voters, showed that nearly 70 percent of the electorate from Arizona, Georgia, Michigan, Nevada and Pennsylvania, battleground states that are likely to decide the election, think the country is headed in the wrong direction. More than half said economic conditions were poor.

The poll found that former president Donald Trump, who is the frontrunner in the Republican presidential primary, was ahead of Biden in those states. Crucially, asked who they trust to do a better job on the economy, 59 percent said Trump while only 37 percent chose Biden.

People Hate Inflation

The negative sentiment over the economy comes at a time when wages have grown, the unemployment rate is the lowest it has been in years and the economy has expanded, fueled by consumers with cash to spend that they have been splurging on dinners out, Taylor Swift and Beyonce concerts and vacations.

In the three months through September, the economy expanded by nearly 5 percent. In October, employers added 150,000 jobs, and while the unemployment rate ticked up to 3.9 percent from 3.8 percent in September, economists hailed the gains as pointing to a resilient labor market amid high interest rates and elevated inflation.

Part of the explanation as to why Americans are anxious over their economic future may go back to their concerns over high prices.

"People hate inflation—hate it," Federal Reserve Chairman Jerome Powell told reporters in September, explaining why people are so dissatisfied with the economy. "That causes people to say, 'The economy's terrible.' But, at the same time, they're spending money. Their behavior is not exactly what you would expect from the surveys."

The Fed, in its effort to battle inflation that at one point had hit a 40-year high, hiked interest rates to their highest in more than 20 years at their current rate of 5.25 percent to 5.5 percent. That effort has helped to slow the rise of prices to 3.7 percent in September, but that is still higher than the policymakers' target of 2 percent.

The increase in rates has in turn pushed up borrowing costs for mortgages and business investment, which economists say could slow down the economy over the next year.

This week, Wells Fargo forecast that the economy may see two consecutive negative quarters of growth in 2024, even as it will expand by less than 1 percent for the year. Meanwhile, the unemployment rate is expected to go up to 4.5 percent by the end of 2024.

Even those projections, though, suggest the economy will unlikely see the depth of struggle Americans experienced during the 2008 great financial crisis.

"Our expectation for a slowdown is relatively mild, especially in the historic context for the U.S.," Jackie Benson, an economist at Wells Fargo, told Newsweek on Thursday. "It's more of a product of the Fed's increasing interest rates hurting business activity and making it more expensive to borrow."

On Thursday, Powell warned that the battle over inflation was yet to be won and that policymakers were leaving the door open for another rate hike after pausing in November.

"Inflation has given us a few head fakes. If it becomes appropriate to tighten policy further, we will not hesitate to do so," he said. "We will keep at it until the job is done."

For Biden, the election may come down to how voters feel about the economy when they head to the polls next year. American presidential campaigns tend to come down to that issue, as the veteran campaign strategist James Carville once said, "It's the economy, stupid."

Last month, a Morning Consult poll found that three in four swing-state voters said the country's economy is headed down the wrong track.

"Over the coming year, Biden's challenge will be to prove his economic successes and address concerns about everyday costs," Eli Yokley, Morning Consult's U.S. politics analyst, wrote.