(Bloomberg) -- Just as Americans are getting ready to cast ballots in November, President Joe Biden’s economy will be right around the dividing line that typically separates winning reelection campaigns from losing ones. 

That’s the takeaway from research by Goldman Sachs that looked through economic data for the best vote predictors and on forecasts compiled by Bloomberg for where those measures are headed.

The US economy’s post-Covid recovery has been one of the world’s strongest, causing pundits – not to mention White House staffers – to wonder why Americans aren’t giving their president more credit. Consumer sentiment had been stuck in the doldrums, and even while it’s improved sharply in the past couple of months, Biden’s approval ratings have not. 

There’s no shortage of theories to explain all this. Economists cite the lingering effects of inflation, which hit a four-decade high in 2022, or the reluctance of Republicans to express upbeat sentiments when a Democrat’s in charge. 

In a Feb. 5 report, Goldman analysts dug deeper to identify a dozen economic variables that helped predict voter behavior in the past. The charts below are based on four of them. Others include measures for which November forecasts aren’t available, like consumer sentiment, as well as market indicators, such as returns on equities and the price of oil.

Of course there are lots of caveats. The pandemic has scrambled some of the numbers for nearly four years, and presidential votes aren’t just a verdict on the economy. Other issues, from Trump’s criminal trials and Biden’s memory to abortion rights and border security, could sway votes.

Still, when pollsters list the issues on voters’ minds, the state of the economy regularly ranks at or near the top. Here’s how it’s forecast to look in the run-d November.

Consumer Spending

The single most predictive measure for election outcomes, according to Goldman’s team, is growth in personal consumption. Last year’s US numbers were strong, supported by a healthy job market and the extra savings that Americans stashed away during the pandemic.

That surprised most economists, who expected spending to cool in 2023. Now they say it’s likely to happen this year instead. Biden will be hoping they’re wrong again. 

What could change the picture before November: With savings from stimulus and the lockdown running out, pay raises will be key to household spending power. For much of the pandemic era, the cost of living rose faster than wages. In the last few months it’s been the other way round, helping brighten consumers’ mood. 

A big risk is that shoppers have been leaning on credit as well as paychecks, and that proposition is looking shaky. Borrowing costs are steep, markets are now betting they won’t come down that much before election day and credit-card delinquencies are already the highest in a decade. 

Jobs

The 15 million US jobs added under Biden are central to his campaign pitch. Unemployment has hovered below 4% for two years but is expected to edge above that threshold in 2024. Even so, not since Dwight Eisenhower in the 1950s has a president seeking reelection been able to boast a jobless rate that low.

The best labor-market measure for predicting elections, though, according to Goldman, is job creation in the period roughly 12 months before voting. That’s forecast to be well below the pace of Biden’s first three years, when the pandemic rebound was at full speed.

What could change the picture: All through last year, economists expected the jobs boom to run out of steam as the Federal Reserve jacked up interest rates. If they’re wrong for just a couple more quarters, it could make a difference for Biden. But the impact of Fed tightening comes with a lag and 2024 may be the year when it bites into budgets, pushing more businesses to shrink payroll. 

Inflation

The pandemic price spike is Biden’s weakest link. Polls suggest it’s been the top voter concern over the past two years. The inflation rate has come most of the way back down, and it’s not especially high right now by historical standards. Still, the typical shopping basket costs some 20% more than in 2019. It takes time for that kind of sticker shock to fade.

 

Read more: Bloomberg Economics on inflation, unemployment and Biden’s prospects

What could change the picture: War in the Middle East has already sent freight costs surging, as rebels in Yemen target Red Sea shipping. If the conflict spreads then oil prices could climb too, bringing pain for Americans at the gas pump and maybe for Biden at the ballot box.

Economic Growth

The US recovery under Biden has been much stronger than the one his former boss Barack Obama presided over in 2012, the year he won a second term. Based on the forecasts for Goldman’s favored GDP gauge, though, Biden may fare worse. The economy is losing speed going into the election, instead of picking up like Obama’s. Still, contrary to a lot of expectations, there’s a good chance he’ll be able to tell voters come November that on his watch the US avoided a recession.

What could change the picture: A recession.

©2024 Bloomberg L.P.