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The Election and the Economy

October 25, 2019

Do presidential elections impact the economy? Tune in to this week's TrendsTalk to learn how the US economy has performed during election years.

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Transcript by Rev

Alan Beaulieu:
Hello everyone, this is Alan Beaulieu, President of ITR Economics, bringing you our latest edition of TrendsTalk. There's a lot going on in the world today and there is a lot on our minds as we head into a presidential election year so let's address that. Right now, today as we speak, GDP on a constant dollar basis is showing a growth rate of 2.3%, that's slowing down from a third quarter 18 high at 3.2%. On a nominal basis it's 4% slowing down off of a second quarter 18 high of 6.0%. Any way you look at it the U S economy is slowing down.

Now, we're likely to see a recessionary quarter, a negative quarter in the first quarter of 2020 as we begin a presidential election year. I think that'll just bounce all around the media, that'll be all over people's minds, it'll all be what they're talking about, and we're going to wonder what's going on. There'll be all kinds of fears of recession in 2020.

Well, here in ITR Economics we think that the first half of the year will be troublesome, slightly negative in some industries, and just slower growth in others, it depends on who you are as you listen to this, but overall the US economy is going to pick up in the second half of 2020. That's good news, we're going to look forward to that. It'll be a positive thing for most people unless you're negatively correlated to the economy.

I have, excuse me ... I often hear that it's a presidential election year, of course the economy's going to be better, so we looked into that. When we look at presidential election years from 1952 forward, and there were 17 of them, we are seeing economic growth and I measure that by the rate of growth in GDPs, rate of change, just shy of 53% of the time. A little more than half of the time the economy is speeding up as we head into, at the end of a presidential election year.

When we look at the overall years in between, '52 to the last presidential election year 2016, that means there are 65 years, the economy heads upwards, strengthens, is picking up speed in the last quarter of the year roughly 48% of the time. There's a slight advantage in being a presidential election year but it's slight, there could even be statistical noise. At this point, if you're counting on the fact that the economy is going to pick up speed, on the fact that it is a presidential election year, that's pretty slim reason to expect good things to come.

Instead, let's look at the leading indicators. Let's look at retail sales and what's going on there. Today there is some negative news about retail sales on a number of media outlets. I'm writing a blog today that will be out soon addressing the details of that and why you should not be concerned. The media makes it sound like the confirming input that we're going to see a recession in 2020. Read my blog, you'll find out the reality of what's on.

There are leading indicators that are beginning to hint at a trough. There are others that are beginning to edge upward, some with a little more conviction than others. As we go through the rest of this year, we think here at ITR, we think you're going to find that there's enough reason to prepare to be busier. That is empirical, it's not based upon a month's data, it's not based upon something as nebulous as a presidential election year, it's going to be based upon economic realities, solid leading indicators, and the cyclical theory that we've been using here at ITR since the 1940s to drive our accuracy in our forecast.

With all that coming at you, please stick with the numbers, stay away from the hype, stay away from the fear, and together we're going to face a stronger second half of '20 and get ready for a good '21. Thank you for joining me today, I wish you the best.

About

Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.