Republicans are suddenly starting to like the US economy. The Democratic Party has gone dark. While the economy itself hasn’t changed much in recent weeks, something else has changed. There was a presidential election.
Donald Trump’s narrow victory in the 2024 presidential election highlights the strangeness of modern economics, in which faith in the economy is partisan. Democrats and Republicans each feel better about the economy when their party is in control of the government and worse when the other party is running things. For some Americans, the actual state of the economy is more important than who is in charge of it.
This dichotomy is evident in the latest consumer sentiment data from the University of Michigan. The Republican sentiment index rose from 53.6 in October to 69.1 in November, its highest level since shortly after President Joe Biden took office in 2021.
Sentiment among Democrats fell from 91.4 in October to 81.3 in November. This is the lowest level for Democrats in 18 months. Democrats remain more optimistic than Republicans, but the large gap narrowed further in the immediate aftermath of the election.
The reversal was even more pronounced when respondents expressed their outlook for future economic conditions. The future expectations index rose from 61.4 to 89.2 among Republicans, but fell from 93.1 to 75.4 among Democrats. Republicans are now more optimistic about the future than Democrats for the first time since October 2020.
Independent people have more calm and stable thinking. They are less optimistic than partisans on either side, both in current sentiment and future prospects. Both measures declined slightly among independents from October to November, but this may better reflect what is happening in the real economy rather than the political economy.
A similar pattern was seen in the 2012, 2016, and 2020 presidential elections, with supporters of the winner suddenly becoming more optimistic and supporters of the loser more pessimistic. Michigan pollsters used to sporadically ask about political affiliation, but after the 2016 election it became a regular monthly question.
So what is the actual economy like? Well, according to most Americans. Considering all political persuasions, Michigan’s index rose in November but remains sluggish, well below its 2021 level before inflation set in and even worse than the 2019 coronavirus outbreak. It is even lower than the previous level. Inflation is a big factor in Michigan’s approach. And inflation continues to burden Americans with high rent and food costs.
President-elect Donald Trump watches SpaceX’s giant rocket Starship take off for a test flight from Starbase in Boca Chica, Texas, Tuesday, Nov. 19, 2024 (Brandon Bell/Pool, via AP) · ASSOCIATED PRESS
Drop a note to Rick Newman Follow him on Twitteror sign up for our newsletter.
story continues
Other indicators are stronger. The Consumer Commission Confidence Index is slightly up from Michigan’s. Employment growth is steady and GDP growth is moderate. Inflation, which peaked at 9% in 2022, is returning to normal. Goldman Sachs puts the probability of a recession next year at just 15% (this is the same for both Republicans and Democrats).
But Trump himself is a wild card in his outlook for the economy. His plans to impose new tariffs on imported goods and deport millions of immigrants working in low-income jobs could hurt economic growth and push inflation higher than normal. . President Trump has not yet made clear how aggressively he will pursue these goals, but markets are bracing for some impact.
For example, long-term interest rates have been rising in anticipation of rising inflation under the Trump administration and tightening monetary policy to combat it. Democrats may be convinced that the Trump administration’s collapse is near. Republicans see smooth sailing going forward. Maybe you’re really as wealthy as you tell yourself.
Rick Newman is a senior columnist at Yahoo Finance. Follow him on Twitter @rickjnewman.
Click here for political news related to business and monetary policy that will shape tomorrow’s stock prices.
Read the latest financial and business news from Yahoo Finance
