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A mixed bag of economic data arrived just days before the midterm elections, featuring rising GDP growth alongside stubbornly high prices and a sluggish job market. While the Federal Reserve decided to keep interest rates steady for now, voters continue to grapple with persistent affordability challenges.
Affordability Concerns and Inflation Pressures
Affordability remains a central issue for voters as the cost of living continues to rise faster than paychecks. According to data from the Commerce Department reported by NPR, September inflation was clocked at 3.6 percent, marking an increase from the previous month and remaining higher than when President Trump returned to the White House. This trend has contributed to nearly two-thirds of Americans disapproving of the president’s economic stewardship, leaving both political parties vulnerable to voter frustration.
Economic Growth Driven by Artificial Intelligence
Despite consumer pain, overall economic activity saw a boost in late summer and early fall. Gross domestic product grew at an annual rate of 3.4 percent in July, August, and September, rising from 2.2 percent in the previous quarter. Federal Reserve Chairman Kevin Warsh described the economy as strong and pointing in the right direction. However, NPR reported that much of this GDP growth stems from massive investments in artificial intelligence rather than a broad-based surge in new employment.
Sluggish Job Market and Slow Wage Growth
The labor market remains slow, with employers adding only 29,000 jobs in September ahead of the upcoming October figures. Although the unemployment rate sits at a low 4.2 percent, workers lack confidence in finding alternative employment if they quit, leading many to stay in their current positions. Moody’s Analytics Chief Economist Mark Zandi noted that extremely low hiring rates fail to reflect a healthy labor market. Furthermore, September figures showed that consumer spending rose 2.5 times faster than wages, compounding public anxiety over the cost of living.
High Mortgage Rates Paralysis Housing Sector
The housing market continues to struggle under the weight of high mortgage rates, which remain a primary driver of economic insecurity. Even though the central bank left short-term borrowing costs unchanged, the average 30-year fixed home loan hovers around 7.25 percent. Zandi explained that these elevated rates have sidelined prospective buyers, keeping fixed mortgage costs well north of 7 percent instead of dropping closer to a hoped-for 6 percent. As the most interest-rate-sensitive sector, housing has dragged down GDP with negative contributions in eight of the last ten quarters.
