REPOST: The Economy of 2016 Weighs on Elections in 2018 and 2020

Recovery after the last major financial crisis has been very diverse and uneven across all states and across different industries. All of which, however, may have been partly (or largely) affected by the United States' political environment. Bloomberg has an interesting article on this matter:

The beginning of an explanation.

 Photographer: Mike Theiss/National Geographic/Getty Images

One of the conundrums of the recovery from the financial crisis is how varied it is and the diverse perceptions of it by different people in different parts of the U.S.

All of this reminds me of John Godfrey Saxe’s wonderful poem, “The Blind Men and the Elephant.” In it, six blind men each touch and describe a different part of the animal. Their incomplete perspective makes it impossible to grasp the whole.

The elephant analogy applies to a U.S. economy, where regional components are very different from, and often bear little resemblance to, one another. Attempts to draw broad conclusions from a single locale or region will inevitably lead one astray.

Regular readers will recall that I have looked at these various differences before, usually in my effort to describe why for so many Americans it feels like the recession never ended. Much of the commentary has been about politics driving sentiment about the economy.

But I’m curious about the opposite causal relationship: How does your local economy affect national politics and state-level voting? It is through this lens that I am trying to understand the red-blue divide that is becoming so stark in America, turning the country into rival camps that neither recognize nor understand one another.

Before we consider that, let’s review some prior discussions: We have noted how strikingly uneven the recovery has been across several different facets of the economy. Housing, for example, has recovered strongly in some areas while it remains in the doldrums in others. Regional differences are stark, with rural areas that once depended on manufacturing in decline while those urban areas with information-services industries are thriving. The same is true by economic strata, based on whether you are in the top 1 percent or the top 0.1 percent. The top percentiles have garnered an inordinate share of all income gains since the recession ended in 2009. 

No doubt, the slow recovery from the credit crisis deserves some blame. When we look at the numbers since 2009, we see a steady but gradual improvement. Unemployment, which peaked at 10 percent, has been more than halved, and now is well below 5 percent. In the eight years before the November election, some 12 million new jobs were added. Employers are now complaining of a shortage of workers in some industries. Job openings, especially for skilled workers, can go unfilled for long periods of time. Wages, which stagnated or fell in real terms for half a decade, only now are rising faster than inflation. 

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"The opinions expressed in this re-posted article are not necessarily the views of LOM, but are presented to provide a broad spectrum on financial matters."