Biden Inherits Economic Laggards That Helped Doom Trump Campaign

(Bloomberg) -- Donald Trump ran for re-election pledging to rapidly restore a pre-pandemic U.S. economy he called the best ever -- and lost in part because that promise didn’t ring true in key industrial battlegrounds.

The problem Joe Biden is inheriting is that in places like Michigan that were crucial to his victory, Trump’s promised bounce-back is looking ever more like a painful grind. Even amid progress toward developing a vaccine, which on Monday was lifting the mood among investors, jobs continue to vanish.

Just how much impact a gloomy economy had on the result of a bitterly fought election is still difficult to say. But there’s evidence that economics played a role in the erosion of support for Trump in some key demographics and regions that got hit hard by the downturn.

Nationally, exit polls show Trump’s appeal waning among most income groups, a pattern that played out starkly in Michigan.

In 2016, exit polls had Trump ahead with every income group in the state, except those earning less than $30,000 a year. This time the initial data from those same exit polls, conducted by Edison Research for national television networks, had Biden prevailing in all groups bar those earning between $100,000 and $200,000 – and even there, Trump’s margin narrowed sharply.

Across the U.S., counties that Biden won tended to have been hit harder economically by the pandemic, according to analysis by the Economic Innovation Group in Washington.

That’s partly because Biden counties were predominantly urban, and more dependent on struggling service industries, than the rural ones where Trump’s support is strongest. But it also held true in Michigan. The counties Biden won suffered a spike in unemployment that averaged 4.7 percentage points in the 12 months through August, compared with 3.5 points for Trump counties, according to the EIG.

‘We Don’t Know Yet’

For Biden, the worry is that the national recovery is slowing as a winter surge in Covid-19 cases hits -- and that things aren’t getting much better in politically-important places like Michigan.

Long before the pandemic “Michigan’s economy had slowed down very substantially in the Trump years,” says Charles Ballard, an economist at Michigan State University. The state of 10 million people created only 20,000 jobs last year, he points out. As of September it had lost more than 440,000 this year -- one-tenth of those who were in work at the start of the year.

And jobs are still disappearing. In Sturgis, near the state’s southern border, the local Kroger supermarket is shutting down for good on Nov. 28, with 73 people losing their jobs after what the company says have been years of unprofitability. North of Grand Rapids, in the town of Sparta, auto parts company Tenneco has announced it will lay off 121 people by June 2021, as it closes a piston ring plant.

In the Detroit suburb of Troy, medical IT firm Ascension Technologies is closing a customer service facility and laying off 223 workers by Thanksgiving. For the town, it’s a blow that comes hard on the heels of the pandemic.

Troy’s daytime population used to double, according to Mayor Ethan Baker, as commuters poured in to work at places like Ascension – office jobs that supported restaurants and retail outlets. But with those workers stuck at home for months, the town is sunk in a Covid rut that’s raised some tough questions about the local economy.

“We’re definitely seeing businesses close, but the full effects of that we don’t know yet,” Baker says. “On a larger scale, what we do with these low to mid-rise office buildings, that’s going to be a big question.”

‘Covid Is Driving’

The town’s finances are in good shape for now, largely because this year’s budget depends on property taxes collected last year, says Baker, a Republican. But absent more federal help, he’s contemplating having to make cuts in spending -- on cops, schools and other services – that will be tricky to explain to voters when he comes up for re-election in November 2023. This year, majorities in the town and county voted for Democrats.

Ballard at Michigan State says the pandemic downturn has laid bare some structural problems that the state has failed to address. It’s too dependent on the auto industry, he says, and hasn’t invested enough in building a future beyond manufacturing. Young university graduates tend to leave.

Gabe Ehrlich, an economic forecaster at the University of Michigan, says the state -- like others -- has experienced a sharp but uneven recovery, with better-paid workers recouping lost incomes faster than those at the bottom of the wage scale.

Ehrlich says he’s not forecasting another spike in unemployment, but also can’t rule it out because “Covid is driving the economy.” He sees Michigan’s best hope as tougher anti-virus measures from a Biden administration, coupled with more stimulus from a federal government that might finally shrug off election gridlock. “The sooner we get that, the more it will help,” he says.

‘I Could Survive’

It may not come soon enough for Jane McNamara.

After shutting her Jazzercise studio in the affluent Detroit suburb of Royal Oak early in the pandemic, McNamara is trying to claw customers back by offering parking-lot yoga classes and live-streaming studio sessions. Her business is still off by 30% from pre-pandemic levels. She’s cut her own pay and is trying to renegotiate her rent. But with overhead that’s “way more” than her current income, it’s not looking good, and options like bankruptcy loom.

McNamara is reluctant to blame her plight on either Trump or Michigan’s Democratic governor, Gretchen Whitmer. She’s leery of offending customers who support one or the other, and won’t reveal who she voted for. But what’s really weighing on her mind isn’t the election but the coming cold weather, which will curtail her parking-lot yoga classes.

“We don’t have very many customers who want to come inside,” McNamara says. “This is all going to depend on whether the pandemic gets worse and we have another shutdown. I could survive if I could get my rent lowered, but that hasn’t happened yet. I’m definitely not out of the woods.”

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