If You Love Trump, You Think the Economy is Strong. If Not, Not. NewsWire

NEWSWIRE: 2/24/20

• According to a new poll, how financially secure Americans feel largely mirrors their feelings about Trump. Fully 48% of white men say they’re better off under his presidency, compared to 33% of white women; blacks and Hispanics, meanwhile, are much more likely to say they’re doing worse, not better. (Financial Times)
• NH: For the first fifty years of the postwar era, one solid rule of thumb in politics was that a good economy directly boosted the incumbent president's approval ratings--and therefore boosted his party's odds of retaining the White House. Starting in President G.W. Bush's second term, this relationship started weakening. Then came the Great Recession and the election of Barack Obama. Over Obama's two terms, the economy steadily improved. But by his second term, improving economic numbers did nothing to improve Obama's popularity.
• With President Donald Trump, this relationship has broken down entirely. Over the last three years, above-par indexes of consumer confidence suggest that Trump's approval ratings should be close to 60%. Instead, his approval ratings are distinctly below-par, in the low- to mid-40s. See "Relationship Between Presidential Approval Ratings and the State of Economy Has Weakened." See also the first chart below.
• What explains this breakdown? Rising partisanship and polarization. Americans' feelings about their political leaders are now so intense that great or poor economic performance no longer sways them very much. Their minds are already made up.
• The disjuncture manifests itself, to begin with, in how people view the economy. If people love the current President, they tend to think the economy is great--or maybe, to be charitable, that it's becoming great since objective facts are always mixed with subjective hopes. If people hate the current President, they think the reverse. Look again at the first chart and notice the complete reversal, coinciding with the election of Trump, in what Republicans and Democrats think about the economy. The second chart makes the same point. But in the third chart we can see that this partisan reaction holds for both sides--and really goes back 15 years. Under GW Bush, Republicans viewed the economy much more favorably than Democrats. With the Obama recovery, the reverse was true. And then, with Trump, we've flipped back the other way.
• It was not always like this. In the third chart, take a look all the way back to the Bill Clinton presidency. Through most of the 1990s, there was almost no difference at all between how Republicans and Democrats viewed the economy. They both thought it was improving--and to roughly the same degree.
• But it's not only how partisanship affects what people think about the economy. It's also how it affects whether they will attribute current economic performance (good or bad) to the current president. Even many Democrats may be willing to tell University of Michigan or Conference Board pollsters that they are more "confident" about the economy in 2019 than they were in 2016. But will they give President Trump any credit for the improvement? That's much less likely. Look at the fourth chart below, in which Pew Research asks Americans in 2012 and 2020 whether the policies of the President (Obama or Trump) are responsible for making the economy better or worse. Here the attitudinal chasm is vast. In 2012, Democrats were roughly six times more likely than Republicans to say that Obama's policies were "making economic conditions better." And in 2020, Republicans were roughly six times more likely than Democrats to say the same about Trump's policies.
• So let's return to the FT story, which relies heavily on data from a monthly survey published by the FT and the Peterson Institute. See also the fifth chart below. Whites are more positive than non-whites about the economy under Trump. Men are more positive than women. The old are more positive than the young. Median wage earners are more positive than low wage earners. What do all these demos have in common? Oh, that's right... they're all more likely to vote for Trump.
• Are these judgments for or against Trump based on objective data on how these groups are actually doing in the economy? Not at all. In fact, several of the anti-Trump groups--in particular, nonwhites, low earners, and young workers--have done significantly better than all other Americans in income growth during the Trump Presidency. To confirm this, go to the two most recent (2017 and 2018) annual income and poverty Census reports. (See also my note, "Income Inequality Highest in Fifty Years? Not So Fast.") Look at YoY growth in average hourly earnings of production and nonsupervisory workers in the private sector. Listen to Fed Chairman Jerome Powell emphasize how Fed policy has pushed wage growth for low-wage earners to the highest rate in years if not decades. Or turn to the run-away growth rate of wages among nonwhite, low-earner, and young workers as measured by the Atlanta Fed's Wage Growth Tracker. (See also charts five and six below.)
• By most measures, in fact, these anti-Trump leaning demos have been doing relatively well during the last few years. And Trump's celebratory drumbeat of positive economic data for blacks, latinos, and low-income Americans in his recent SOTUS was based on valid data.
• But here's Trump's problem. Despite their recent economic gains, many of these workers will not be inclined to generalize their own experience to the entire economy. And even if they did, they will not be inclined to credit Trump's policies with improving the economy. After all, who is to say that it's Trump who deserves credit? Maybe the credit belongs to Powell's rate cuts. Or maybe it belongs to the dynamics of a tight labor market--something that typically happens late in the economic cycle.
• In all fairness, Trump's approval numbers have been rising over the last four months.  And at least some of that improvement is probably due to a full-throttle economy. See that last chart below, taken from the monthly FT-Peterson Institute survey, which shows a 6 pp rise (from 45 to 51%) in the share of Americans who say that Trump's policies have helped the economy either "strongly" or "somewhat."
• But that's still pretty disappointing for a President who can claim the lowest unemployment rate in over 50 years. More ominously, the share is lower (and shows no improvement) in the more industrial "battleground states." And, of course, no one can say where the economy will be in eight or nine months, when voters will be going to the polls.
• One more item is worth mentioning and sticks out in the last chart. This is the very large share of Americans who say that "rising health care costs" is the "biggest threat to the U.S. economy." Roughly three-quarters of Americans want some sort of public health insurance guarantee or buy-in unrelated to income. Trump is pretty much dead in the water on this issue. But any Democratic nominee, Sanders especially, will be pushing it to the max. Trump won in 2016 by being the populist and anti-establishment wrecking ball. He'd better watch out. Unless he moves quickly in 2020, he may become the victim of that wrecking ball.

• Early estimates from 2019 suggest that South Korea’s dismally low birthrate has fallen even more and that its population may peak as early as next year. November 2019 marked the first month on record when deaths in the country outpaced births, as the number of newborns that month dropped to the lowest ever. (The Diplomat)
• NH: The Republic of Korea is in demographic free fall. Last September, we reported that total fertility rate (TFR) of South Korea in 2018 came in at 0.98. This made it the first entire nation in recorded history--absent total war or plague--to register an annual TFR of under one. In that report (see "South Korea's Total Fertility Rate Falls Below One") we explained in some detail all of the drivers that are pushing South Korea's TFR to decline so rapidly. In December, we offered an update (see "World's Lowest Birth Rate Record to be Broken by South Korea, Again"): According to Q1 data for 2019, South Korean TFR has fallen even further, to 0.88.
• And now this news (see the charts below), which is bad across the board. As of November of 2019, total births are down YoY -5.9%. Total deaths are up YoY +5.1%. And total marriages are down YoY -10.1%. If you think of marriages as a sort of leading indicator of future births, this third trend hardly seems promising.
• The article is incorrect about last November being the first time monthly deaths have exceeded monthly births. Actually, that first happened in December of 2017. Apparently, and for complex cultural reasons, Koreans tend to have very few births in December. So it was natural that deaths should first exceed births in a birth-trough month. It is true, however, that last November was the first "normal" month in which deaths exceeded births. It is also true, as the article states, that monthly births have now been declining, year on year, for 44 consecutive months. What will be the first full year in which deaths exceed births? Probably not 2019. But that looks extremely likely by 2020.
• South Korea is by no means the first nation to experience "negative natural increase" (in the parlance of demographers). Japan has been experiencing population decline almost every year since 2005. And that's because Japan started aging much earlier than South Korea. In 1974, when Japan fell permanently below the replacement rate TFR of 2.1, South Korea's TFR was still almost at 4. Japan at that time was already an affluent industrial economy. South Korea was still an impoverished agrarian economy.
• What's astonishing, rather, is the rapid pace of South Korea's demographic aging--along with the rapid pace of its economic development. Every year, it seems, prior population projections have to be ratcheted downward. Just last year, in 2019, Statistics Korea projected that the country's total population would peak in 2028. Now it says this year. By 2067, it projects a total population of 39 million, down from 52 million this year. That's a 25% decline in 47 years. But just hold on. That projected slope may steepen next year.

 

• In January, Greece began rolling out its first baby bonus: €2,000 for every new birth. The program is expected to cost up to €180 million a year (about 0.1% of GDP) and is open to both non-EU residents and EU citizens. (The Guardian)
• NH: Greece is a little late to the “baby bonus” train. The country’s fertility rate is among the lowest in Europe, but leaders have been slow to act even as its similarly plagued neighbors began introducing birth-boosting strategy after strategy. (See “Hungary to Provide Free Fertility Treatments to Boost Population” and “Putin Pays New Mothers to Have More Children.”) The fact that this bonus is available to non-EU residents suggests that Greek legislators are at least open to the idea of migrants being part of the solution to their population woes--but not too open, as they also just announced the construction of a mile-long floating fence to deter more sea crossings from Turkey.
• Greece’s new policy is likely just the first of many incentives to come. Once countries have launched these kinds of programs, they’ve only expanded at the urging of officials eager to see better results. Armenia recently announced that it will raise its baby bonus payouts dramatically. Finland, meanwhile, is banking that more family leave will help get its lagging birthrate in line with its Nordic peers. As early as next fall, the amount of parental leave for each parent there will increase significantly to 164 days each.
• Over the past five years, Americans have become more willing to vote for presidential candidates with all kinds of characteristics and beliefs, with only one exception: socialists. Socialists are the only group that still receive majority opposition (53%), in contrast to groups that used to be in the same position—like atheists or gays and lesbians—but have since gained majority acceptance. (Gallup)
• NH: This news isn’t surprising. A couple of days ago, the WSJ published a similar poll that said only 21% of registered voters were “comfortable” voting for a socialist. And more generally, we recently looked at a survey that showed the number of Americans that identify as “liberal” has started to decline, which might be interpreted as a rejection of the more progressive march of the Democratic party (see “Ideologically, the U.S. Leans Center-Right”).
• On the other hand, don’t be fooled by the CNN media narrative that these polls mean Bernie Sanders, a self-declared democratic socialist, can’t win the presidency. The Trump campaign will certainly be playing this theme. So will all the DLC centrists with links to the Clintons and the Obamas who are spooked by the left wing of their party. But a well-known fact among pollsters is that off-putting generic facts about a hypothetical candidate often don't matter once voters get to know the actual candidate. If, for example, you had asked voters in 2015 whether they would in theory vote for a New York City casino tycoon who never held public office before, got all his news from TV, and was an avowed "America First" protectionist, I think the answer would have been no. But then voters met Donald Trump, and somehow the real person worked for them.
• Ditto for Sanders. Virtually all Americans have heard of Sanders by now. They all know he calls himself a "socialist." And yet Sanders is beating Trump in 9 out of 10 of the head-to-head polls monitored by RealClearPolitics. On average, since the beginning of February, Sanders is beating Trump by 4.4 percentage points. It used to be thought that Democrats were so fixated on finding a candidate that could beat Trump that they would stay away from Sanders. No longer. According to a WP-ABC poll, Democrats now regard Sanders, in the wake of his Nevada primary victory, as the candidate most likely to defeat Trump.
• Many sage Democrats are shaking their heads. They think that Sanders will get obliterated by Trump in 2020 just like McGovern--another youth-favored lefty--got obliterated by Nixon in 1972. But that was another America and another era. Among the many differences, Richard Nixon in 1972 had approval ratings of over 60%. Trump is struggling to keep his at 45% on a good day.

• A new study reports that most of the growth in rental households since 2010 has come from households with incomes over $75,000. In turn, a growing share of new rental construction consists of places with more expensive amenities, and the supply of low-cost units has declined sharply to just 25% of all rental stock. (Joint Center for Housing Studies of Harvard University)
• NH: As usual with JCHS reports, there's a lot to digest here. The main finding is that America's overall rentership rate, which reached an all-time low in 2004 (just as homeownership reached an all-time high), rose for the next 12 years until 2016 and has since declined only slightly. Part of this rising rentership demand was satisfied by widespread conversions of single-family homes from owner-occupied to rental. The rest has been satisfied by a decade-long boom in large-scale (5+) multi-family construction. See the first chart below.
• As for demographics, the composition of renters from 2004 to 2018 has become older, less white, and less traditional (e.g., fewer families with children). See the second chart below. But the report is a bit misleading here. It fails to point out that the reason for this shift is mostly because these groups are growing as a share of the population--not because older and whiter people are now a lot more likely to rent. It's true that all demos are now more likely to rent today than in 2004. But in fact the rentership rates of minorities and younger age groups are a lot higher, compared with 15 or 30 years ago, than the rentership rates of whites and older age groups.
• The number of renter households are rising in every income bracket, but the number is rising fastest in the highest ($75K+) income bracket. This is partly due to the rising average age of renters. But even more, it is due to the location of new multi-unit construction: large metro areas where incomes are growing faster. See the third chart below. Vacant commercial land is today 105% more expensive than it was in 2010--and 20% more expensive than at the peak of the last building bubble back in 2007. 
• Which leads to my last take-away. From 2001 to 2018, affordability has been declining in every age bracket--except the lowest (<$15K) where it cannot get any less affordable. See the last chart below. The only reason affordability is declining for all renters is because the share of high-income renters is rising. Meanwhile, for all moderate- and low-priced units, vacancy rates have been declining steadily over the last decade. In major metro areas, nearly 70% of all households with incomes under $50K pay over 30% of their income on rent; roughly 35% pay over 50% of their income on rent. The JCHS authors note that these "severely" rent-burdened household "spent 38% less on food and 40% less on healthcare in 2018 than otherwise similar renters with housing they could afford."

 

• In the latest Atlantic cover story, David Brooks declares: “The Nuclear Family Was a Mistake.” The piece breaks down the conditions that made the nuclear family of the 1950s and ‘60s possible—many of which remain true for the affluent, but have fallen away among lower-income families who are struggling for support. (The Atlantic)
• NH: David Brooks’ new article is what we have been saying for years (see “Household Formation: Why Is It Declining and Where Is It Going?”). The “nuclear family,” a household made up of only immediate family members, was a generational blip in history, and we are now seeing what I like to call the “renaissance in extended family living.” (See “Multigenerational Living Is a Return to Normalcy.”)
• As Brooks points out, for most of human history people lived in multi-generational homes. But starting with the coming of age of the Silent Generation the "nuclear" family came to prominence. This trend lasted about two generations ending after the early Boomers. Now again we are seeing a rise in multi-generational households.
• We have often explained this trend through generational theory. Millennials honor community and togetherness. The multi-generational home gives them the support they seek  (see “How Togthertherness Is Killing the Housing Market”). Boomers, unlike their parents, are aging in place and rejecting the retirement home. They want to be close to their family and friends, so they are now opening their once empty nests back to their children. 
• An added point that Brooks makes is about the effects of divorce. As Charles Murray describes in his landmark book Coming Apart, white America saw a disintegration of the "nuclear" family from the Boomers to the Xers. High levels of failed marriages made families even smaller than the "nuclear" unit. Grandparents started living with their single adult children helping them take care of their grandchildren. The return to multi-generational living wasn't in response to the success of "nuclear" families, it was a response to its failures. 
• If current demographic trends continue, the already-large east-west and north-south divides in Europe are poised to get even worse. With their lower birthrates and higher emigration, countries in southern and eastern Europe are straining to keep up with the rest of the EU. (The Economist)
• NH: The Economist divides up Europe into three demographic zones. The first zone, mainly in the north and west, has both the youngest populations (that is, the highest fertility rates and the lowest aged-dependency ratios) and the highest rates of net immigration. The second zone, mainly in the south yet also including Germany, has an older population but also reasonable rates in net immigration. The third zone, mainly in the east, has younger populations but also suffers from a serious net emigration flow--typically to other (western) European countries.
• While the first zone is well situated demographically, the others have reasons to worry about their future. Low fertility or net emigration both tend to push down the growth rate of the working-age population, leading ultimately to economic deceleration and fiscal insolvency. And each problem, in turn, will lead to the other. Low fertility will sooner or later persuade younger workers to emigrate. And a steady emigration of younger workers will inevitably undermine fertility.
• Pay special attention to countries that belong in both zone two and zone three--for example, Portugal, Italy, Finland, Greece, and Bulgaria. These countries are in arguably worse shape than such central European nations as Hungary and Poland, which are already experimenting with radical policy measures to change the tide. (See "Bold New Policies to Encourage More Births.") They need to wake up and pay attention.

• In a long essay, Millennial writer Gina Tomaine explores the many reasons she and so many others in her generation are ambivalent about having children. Tomaine’s biggest fear is financial ruin; she’s also afraid of not being able to provide her kids with the same kind of resources and activities that her parents did for her. (Philadelphia)
• NH: A solid exploration of an oft-covered topic. What sets this one apart (and makes it a good candidate for any adult Millennials to e-mail to their parents asking about grandkids) is how thorough it is, and the time the author spends discussing a consideration most essays of this kind don’t: expectations. She and her friends remember idyllic childhoods filled with piano lessons, soccer practice, homework help, and trips to the library. Their parents devoted their lives to making them feel special, and now they’re going to feel like failures if they don’t raise kids who are even more special. It’s terrifying.
• Compounding her fear is the sense that all this intensive parenting didn’t even pay off. Tomaine writes: “We did what we were supposed to. We went to college and sometimes graduate school, got good jobs, worked hard — yet we still ended up in an economic situation where our wages aren’t high enough and the things we need to buy cost too much money, where we’re never able to outpace our loans. [….] We checked all the boxes and still ended up in a losing battle, living with a gnawing internal shame about our failure to ‘grow up.’ Do we want to put our hypothetical kids through that kind of pressure?”

DID YOU KNOW?

Nothing But the Best for My Fur Baby. Flying with your pet can be stressful. Delta is here to help. The airline just introduced a pet carrier with a built-in water bowl, triple-locking doors, industrial-strength walls that protect pets from weather changes, and specially angled blinds. Owners can track the journey via GPS. The cost? $850 per flight. This may seem high, but it’s a good bet many pet lovers will pay up. Americans spent more than $52 billion on their pets in 2019, up from $34 billion in 2009. That’s according to Euromonitor International, whose latest report on pet care also highlighted just how much Americans spend compared to other countries. Last year, the United States spent over $150 per person, on average, on pets. In second place is Britain, which spent $93. France forked over $87. There seems to be no ceiling for what Americans will shell out for their furry companions, whether in the form of lodging, food, or fancy furniture. (See: “A Bed Worth Barking About.”)