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By Andrew Stanton and Carlo Versano
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Vice President Kamala Harris' greatest political weakness—the economy—took a back seat at a Democratic National Convention framed largely around joy, vibes and excitement. Now it fell to Federal Reserve Chair Jerome Powell to provide some clarity during a highly anticipated speech on Friday.
Democrats did focus their convention on a number of policies, from reproductive rights to criminal justice, health care and even immigration, another weakness. But pocketbook issues like inflation and wage growth received less attention from speakers throughout the week, despite polls that show those among the pitfalls that could hobble Harris' campaign come November.
A CBS News/YouGov poll released last week found that 83 percent of respondents believe the economy is a major factor in this election—and that Donald Trump led among those worried about their own personal finances.
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An ABC News/Washington Post poll two days later showed Trump leading Harris by 9 points, 46-37 percent, in trust to handle the economy.
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Despite those flashing warning signs for the Democratic party, their convention was largely built around other issues intended to energize the party's base, political experts told Newsweek.
Now, after the balloons have fallen from the rafters of the United Center, the chair of the Federal Reserve delivered a policy speech from the central bank's annual symposium in Jackson Hole Friday morning that gave an update about the state of the U.S. economy as the general election gets underway in earnest.
"Four and a half years after COVID-19's arrival, the worst of the pandemic-related economic distortions are fading. Inflation has declined significantly. The labor market is no longer overheated, and conditions are now less tight than those that prevailed before the pandemic," he said.
Powell said he "his confidence has grown" that inflation is now on a "sustainable path" back to 2 percent—tumbling from a 7.1 percent peak two years ago. The bank's "soft landing" goal of inflation being curbed without causing a recession or large unemployment rise is now within sight.
He suggested interest rate cuts may be in the future, saying the "direction of travel is clear." But he said the "timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks."
Meanwhile, the unemployment level is 4.3 percent, but rising unemployment "reflects a substantial increase in the supply of workers and a slowdown from the previously frantic pace of hiring," he said.
"Even so, the cooling in labor conditions is unmistakable. Job gains remains olid but have slowed this year," he said, adding that he doubts "the labor market will be a source of elevated inflationary pressures anytime soon."
Minutes from the Fed's most recent meeting at the end of last month showed that the vast majority of the 19 policymakers said they would likely support a rate reduction at the next meeting in mid-September, assuming inflation remained low.
Markets are pricing in a cut of either a typical quarter-point or a more aggressive half-point drop and investors will be watching closely for any clues on the pace and size of future cuts.
Stock futures rose Friday morning ahead of the speech, with Dow Jones Industrial Average gaining 84 points (0.2 percent), those on the S&P 500 were up 0.4 percent and the Nasdaq 100 futures rose 0.6 percent in premarket trading. Asian shares were mixed in muted trading Friday, although Japan's benchmark Nikkei 225 rose 0.4 percent.
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Economists note forthcoming data, especially the monthly jobs report on September 6 will determine the size of further cuts beyond next month's meeting.
"We think he will seek to dampen expectations of (a half-point cut) as well as reiterate that the Fed is data-dependent and does not make decisions in advance," Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note.
In comments reported by the Guardian, Henry Allen, a strategist at Deutsche Bank, wrote: "Last year, Powell said that they intended 'to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective'. But over the following 12 months, we've seen inflation experience a noticeable decline, along with an increase in unemployment. So from both sides of the Fed's dual mandate, we've moved much closer to a point where the Fed have cut rates in previous cycles."
Powell's remarks come amid conflicting economic indicators, one or more of which could turn into this election cycle's October surprise.
On the one hand, the economy is humming along. Big banks like Goldman Sachs no longer believe a recession is imminent, corporate earnings have been decent-to-strong and stocks are essentially back to levels they were a month ago—before a brief but sharp drop—and still up double-digits on the year.
And yet, there are signs of cracks forming.
This week, the Labor Department revealed that the job market is significantly weaker than it has appeared, with payroll figures revised downward by more than 800,000—a shocking 28 percent—for the 12 months ending in March. The Canadian government is working to resolve a rail stoppage, an X factor that could throw North American supply chains into chaos ahead of the holiday season. Consumer spending, the bedrock of the economy, has slowed as inflation-weary shoppers turn prudent.
These are issues that got scant attention this week in Chicago, for good reason (no one likes a party pooper). And Harris may well take a renewed focus on kitchen-table economic concerns as she hits the trail in earnest over the coming weeks, Anne Danehy, a professor of political science at Boston University, told Newsweek on Thursday.
"I think that they'll bring much more concrete policy on the economy. Right now, this is establishing what the Harris-Walz ticket, and this is who we are. These are our values," she said.
She noted that some economic priorities—tax cuts and prescription drug prices among them—have received more attention from speakers at the DNC. Inflation, she said, took a back seat as it is "a bit of a downer," and is more difficult to discuss at an event intended to "invigorate" Democratic voters.
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Some speakers, such as Massachusetts Sen. Elizabeth Warren and Pennsylvania Sen. Bob Casey, did play up the economy in their speeches, albeit in broad strokes.
"We need to make life more affordable for working people. Donald Trump, the felon, has no plans to lower costs for families. He doesn't know how, and he doesn't really care," said Warren.
Republican strategist Matt Klink told Newsweek that Democrats "missed a huge opportunity to discuss pocketbook issues during the convention, specifically to highlight to consumers how they will focus on lowering prices."
"Doing so won't occur by going after grocery stores and 'evil' corporations. Proving price gouging is extremely difficult to prove and rarely occurs," he said, referring to one of the concrete economic policies Harris has thus far unveiled—a widely panned plan to institute price controls on grocery stores.
He said that Democrats have spent so much time on reproductive rights because they believe it will bolster Harris' standing with suburban women, a key voting bloc. He added, however, that these voters "also care about other issues, specifically the cost of food, rising insurance costs, and the high price of gasoline or a failing public education system."
"Conventions cater to the party faithful, the true believers in the party. Little effort has been made during the 2024 Chicago Convention to appeal to moderates. Democrats have focused on 'joy' and 'freedom,' but only the freedoms a more activist, powerful government, as envisioned by the Harris-Walz ticket, would provide its citizens," he said.
Indeed, in her keynote address accepting the nomination on Thursday, Harris spoke about housing costs and called for an "opportunity economy," but did not mention gas prices, grocery costs or interest rates that have affected things like Americans' ability to buy a home, insure their car or take out a loan.
Donald Trump noticed. Speaking to Fox News immediately after the speech, the former president said:
"She didn't talk about interest rates. I mean, the interest rates are now getting close to record rates. People can't do business. Nobody can borrow money. People can't go to the American dream and buy a house because they can't afford the interest rate. And even if they could, the money isn't available."
In fact, mortgage rates have been inching down as markets price in the expected interest rate cuts by the Fed.
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Grant Davis Reeher, a professor of political science at Syracuse University, told Newsweek that independent voters may look back on the DNC wanting more from the party, noting that more substantive plans have been "lacking" so far.
"Staying murky on substance might be a good thing, if they can keep the honeymoon going," Reeher said. "I think many of the Democratic stands on domestic policies related to pocketbook issues might alienate them from the voters that they'll need in the battleground states. Certainly, some of the things that appeal to the base."
He noted that Harris has had less time to craft a more concrete policy platform given that she only entered the race a month ago.
"The lack of substance and definition in the campaign's message at the convention might reflect that they are still trying to figure out their stands on those economic issues, and what they are going to offer that's different," he said.
Newsweek reached out to the Harris campaign for comment via email.
Meena Bose, the executive dean of Hofstra University's Peter S. Kalikow School of Government, Public Policy and International Affairs, told Newsweek that Harris and her running mate, Minnesota Governor Tim Walz, are likely to craft a more cogent economic message as the campaign goes on.
"The swift shift from Biden to Harris as the Democratic presidential nominee just four weeks ago makes the convention focus on freedom, democracy, and broader themes of political participation and governance unsurprising," she said.
Robert Y. Shapiro, a professor of political science at Columbia University, told Newsweek that more economic focus will come during campaigning, as well as during Harris' debates against Trump. He noted that conventions lay our "generalities" for candidates, rather than specifics.
"Harris has separately been laying out parts of her economic program and what she opposes regarding what Trump wants to do regarding taxes and tariffs," he said.
Joshua Sandman, a political science professor at the University of New Haven, told Newsweek it was "wise" for the DNC not to overly focus on pocketbook issues.
"These issues cut both ways for the Democrats. The economy is strong, yet inflation, housing costs, wages and jobs are troubled. The DNC attempted to find a middle path on the pocketbook issues. Speakers showed understanding and concern and promised to prosper the middle class," he said.
Other issues, he said, are less problematic for Democrats speaking at the convention, and Republicans have generally controlled the narrative on the economy.
GOP strategist Brent Buchanan told Newsweek Democrats spoke less about the economy because "anger is the strongest emotion to get voters to dig into their existing beliefs and show up to vote."
"Elections are now more about turnout than persuasion, which is why other issues—like abortion - have taken center stage at the DNC," he said.
Danehy, from BU, said that despite less specific discussion of economic policies, the DNC was among "the most strategic convention" she has ever seen.
"It seems like it's very clear, the message they're trying to convey. What they're trying to go after, to get those small undecided voters … to win them over," she said.
Time will tell whether the limited focus on the economy in August will matter in November. Presidential elections have a way of turning on a dime—just ask Barack Obama. In 2008, as he accepted his party's nomination, the candidate crafted an acceptance speech heavy on foreign policy, slamming George W. Bush repeatedly over the Iraq War.
Less than three weeks later, Lehman Brothers collapsed.
Follow Newsweek's live DNC updates here.
Update 8/23/2024 10:30 a.m. ET: This article was updated with additional comment.
Update 8/23/2024 2:32 p.m. ET: This article was updated with additional comment.
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