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A Booming Economy Hasn’t Given House GOP Candidates an Election Edge

(Bloomberg) -- The economy is robust, consumers are spending and Republicans are still increasingly at risk of losing their grip on Congress.

The headline numbers should be good news for the party in power: a report Friday showed U.S. economic growth accelerated in the second quarter by 4.1 percent, the fastest since 2014, unemployment is at 4 percent and the S&P 500 Index, up about 5.9 percent this year, is less than one month away from overtaking the longest bull run ever.

Yet by some political yardsticks -- polls, fundraising, voter turnout -- the data favors Democrats over the GOP in the November congressional elections. Among the reasons are the uneven spread of the prosperity and President Donald Trump.

“We’ve never had such a large gap between voters’ approval of the president and their views on the economy,” said David Wasserman, House editor of the nonpartisan Cook Political Report, who forecasts Democrats will gain between 20 and 35 seats in November elections. “And their views on the president are driven by not only the economy but also his temperament and behavior.”

Trump’s approval ratings have been mired in a narrow range since he took office and it stood at just 42 percent in Gallup’s most recent weekly tracking poll. Since 1970, the president’s party has lost an average of 33 House seats when the chief executive’s approval rating is below 50 percent. Democrats need a net gain of 23 seats to win control of the House, though their path to a Senate majority is much more challenging.

Wasserman is among several independent analysts who say Democratic prospects to take the House have ticked up in recent weeks. On Thursday, House Majority Leader Kevin McCarthy of California warned his GOP colleagues that they need to step up the pace of fundraising and campaigning, and that even secure Republican incumbents can’t take their re-elections for granted.

Trump on Friday seized on economic growth data, calling it “amazing” and “very sustainable.” He credited his policies, including the biggest tax overhaul since the Reagan era, and was echoed by Republican lawmakers and their allies.

The likelihood is nevertheless that the pace of growth will slow as the effects of tax cuts fades, companies pull back in the face of foreign tariffs and the Federal Reserve raises interest rates further. The next report on the economy’s growth, for the third quarter, will come Oct. 26, just 11 days before the election.

Consumer Spending

On the surface, the GDP data shows that consumers have deeper pockets than previously thought. Consumer spending, which comprises 70 percent of the economy, grew at a higher-than-forecast pace of 4 percent in the second quarter.

While corporations benefit from tax cuts that contributed to profit in the first half of the year, wages haven’t budged much. Hourly wage growth climbed only 2.7 percent in June from the prior year, stuck in the 2 percent range following the 2008 financial crisis. They were as high as 3.6 percent in 2007.

But real earnings, which are adjusted for inflation, have stagnated and even fallen for bottom earners. Wages in the top quintile rose to $48 an hour in 2016, 27 percent higher than 1979, while upper-middle earners made 12 percent more to $27 an hour. But wages for Americans in the bottom fifth fell in that period, according to Brookings Institution calculations of Bureau of Labor Statistics data.

Moreover, economic growth isn’t evenly distributed by geography. In metropolitan statistical areas associated with 15 House districts where Democrats have a chance to flip a seat from Republican control, there was zero or negative job growth between January 2017 when Trump took office and May, according to Bureau of Labor Statistics Metropolitan Area Employment and Unemployment report.

The disparities are seen in the very different economic messages being delivered by Republican and Democratic candidates and in the reaction from voters.

Struggling Region

In upstate New York, which has been in economic decline since before the Trump administration, some voters say the region has continued to struggle.

"Our unemployment rate is still very high, it’s really hard for struggling families to get a living wage job," said Mary Clark, a 60-year-old community organizer from Binghamton. In a close House race, Clark is backing Democratic state assemblyman Anthony Brindisi over first-term Republican Representative Claudia Tenney.

But for Tina DaBella, a 54-year-old travel agent from Binghamton backing Tenney, things are working out.

“His policies across the board have been fine for me,” she said. “It’s not going to be for everybody. No president is going to come off with a policy where 100 percent of the people are going to be happy but I like what he’s doing.”

Virginia Race

The same divergence is playing out in in Republican Dave Brat’s central Virginia district, where he faces a strong challenge from Democrat Abigail Spanberger, a former CIA officer. Brat said GOP policies are producing “real world results” that have proven wrong those who said the U.S. economy would never grow faster than 2 percent.

"Not one Democrat voted for the tax cuts which are now causing massive economic growth for everyone," he said on Bloomberg Television. "We have a pro-growth agenda. The Democrats don’t have any agenda that I am aware of."

Spanberger said Virginia voters are telling her that higher health-care premiums and uneasiness about the erratic nature of policy making have tempered some excitement about economic growth. She said lawmakers need to focus not just on short-term gains, but also the long-term impact of their choices, including wider yearly budget deficits.

“I’m concerned with what is the buying power of American families. We’re seeing that real wages are stagnating and in some cases going down,” Spanberger said.

Representative Jim Jordan, an Ohio Republican, said Friday in an interview on Fox News’s “Fox & Friends” that while there is some good economic and other news for congressional Republicans, they still face tough questions about whether they’ve kept promises to voters.

“We’ve certainly helped with the taxes. But all of those other things that we told the American people we would accomplish, we haven’t done," Jordan said. “Repeal Obamacare, reform welfare, build the border security wall and fix our immigration system, and control spending -- we haven’t done that.”

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