Editor's Note: This column was co-authored by Mr. George F. Lang, an Oho state senator and business owner, Dr. Thomas Rastin, a retired business executive from Ohio, and Mr. Anthony F. Storer, a McNair scholar and finance major at Northwood University.
During the heat of the 1992 presidential campaign, Clinton Campaign adviser James Carville uttered the now-famous words, “It’s the economy, stupid!” The veracity of Carville’s statement seems to be relevant again for American voters as they ponder their choices in our 2024 presidential election.
Listed below are several important factors influencing the US economy Americans should consider before voting on November 5th.
Signals from Trucking
The trucking economy powered America through the darkest days of COVID is by most indicators in recession or worse. The condition of trucking does not bode well for the economy of 2025 and beyond. Consider the April 18, 2024 findings of Jack Porter in The Trucking Activist:
“Working in this industry for the past 45 years, we have seen recessions, (but) nothing like this one. The industry is absolutely struggling with revenue and pressures from shippers and 3PLs (third-party logistics providers) grinding rates well below the average cost of operation. In a nutshell, the carriers I track financially have lost 50% of their gross profit over the past year. The squeeze from variable cost increases have been the biggest reason for the margin erosion. There are no more costs we can address; we have cut costs to the bone, and the American economy should understand that this business supports and is responsible for roughly 15% of the nation’s overall GDP. That trucking capacity fulfilling this service is at risk.”
Measuring Inflation
From January 2021 through the end of April 2024, using the Bureau of Labor Statistics (BLS) CPI Inflation Calculator, overall inflation during the first three years and four months of the Biden administration was 19.97% (or 5.99% annually), compared to 7.72% (or 1.93% annually) during the Trump administration. This rate is below the Federal Reserve annual target of 2%.
What are Key US Stock Indices Telling Us?
Daniel Patrick Moynihan was often quoted as saying, “You’re entitled to your own opinion, but not your own facts.” This is especially true today when analyzing the major US stock markets. Opinions abound on performance, but the following facts may surprise you.
The Russell 2000 Index tracks 2,000 of America’s best publicly traded small cap stocks (under $10 billion market cap or value). The Russell 2000 is often referred to as the key bellwether for the general direction of the US economy and the overall condition of US business. Many S&P 500 companies were originally listed on the Russell 2000 before reaching the status and size of an S&P 500 company.
If one compares the performance of the Russell 2000 during the Trump and Biden administrations, one will find the Russell 2000 grew 59.83 percent during the Trump administration, while declining roughly 3 percent to date during the Biden administration. If one adjusts the Russell 2000 under President Biden for inflation, the return is actually negative 22.4 percent.
Voters may be surprised to find the Dow Jones Industrial Average (DJIA), Standard & Poor’s 500 (S&P 500), and NASDAQ all had better growth under President Trump (DJIA = +57.3% , S&P 500 = +69.6% and NASAQ = +142.2%) relative to President Biden (DJIA = +28.3%, S&P 500 = +37.7% and NASDAQ = +24%) to date.
Used Car Prices
Former US Federal Reserve Chairman Alan Greenspan argued used car prices were a strong barometer of the US economy. He noted falling used car prices would directly or shortly thereafter be accompanied by reduced sales of used cars followed by falling new car sales. Greenspan said this would happen during periods of high inflation when consumers had reduced purchasing power and are worse off due to higher costs for food, gasoline, mortgages, etc. The result would signal the beginning of a slowing economy and potentially recession or depression.
The April Bureau of Labor Statistics CPI report showed both new and used cars and light trucks declined 1.3 percent and 6.9 percent respectively from April 2023 to April 2024. In fact, used car prices this April are down 16.8% from their February 2022 post-pandemic high.
New vehicle inventory on dealer lots increased from 55 days in May 2023 to 76 days in May 2024, an increase of 38.2 percent, according to Cox Automotive. Consumers are taking longer to determine if they can afford to buy a new vehicle, indicating a lessening of consumer confidence in the economy.
Declining GDP
Third quarter 2023 US GDP recorded a robust 4.9% growth rate, a slower 3.4% in Q4 2023 and a disappointing rate of 1.6% according to the first estimate for Q1 2024. Many economists are worried about GDP growth for the remainder of 2024, due to high interest rates and the declining level of private investment in the economy.
An Increasing Unemployment Rate
According to the Bureau of Labor Statistics, the US unemployment rate has increased from 3.4% in April 2023 to 3.9% a year later. The current unemployment rate could be signaling a recession according to the Sahm Rule. The Sahm Rule is a recession indicator that has accurately identified the start of every recession since 1970. It is said to signal a recession when the three month moving average of the unemployment rate increases by half a percent or more above its 12-month low.
Small Business Optimism
The National Federation of Independent Business’s (NFIB) Small Business Optimism Index, which measures the outlook and optimism of small business owners, has been below the index’s 50-year average of 98 for the last 28 months. Inflation and its impact on consumers remain the No. 1 concern for small businesses in America.
Rocketing Regulations
According to a recently released study by the American Action Forum, the dollar cost of regulations written and made into law have skyrocketed under President Biden. The study indicates the regulatory burden on the US economy actually declined by $160 billion under President Trump, while increasing more than $1.6 trillion to date under President Biden. Among the most adversely affected sectors are energy and manufacturing.
Conclusion
If the above factors are not enough to drive record turnout for the November elections, the fact that the US national debt has gone from 30 percent of US GDP in 1981 to more than 122 percent of US GDP today, should be.
The average American taxpayer now owes a debt burden, beyond their own personal debt of $276,000 to cover their share of the current and growing $34.7 trillion US national debt. The debt surpassed $1 trillion in 1981 and $14 trillion in 2011.
If Americans want to remain citizens of the largest, most prosperous economy in the world, we must vote for lower taxes, less government spending with balanced federal budgets and a regulatory environment that encourages risk-taking, entrepreneurship and the American Dream.
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