For nearly the last half century, the top issue for US voters has been the economy. But as the dust starts to settle on the results of last week’s election, that decades-long trend of economic performance determining the next president is looking like a defunct litmus test.
Despite Biden and Harris overseeing an economy that has outperformed many others worldwide – recovering from a fifty-year high in inflation with 2.9% GDP growth – Trump’s sweeping victory might suggest that a stronger economy be damned.
But a different take is also possible. That the economy was, in fact, a crucial factor, just not by the indicators that economists and the media are used to reporting. Instead, what can be called the ‘human-felt’ economy was crucial. And this is something Labour should pay close attention to if the party wants to secure a second term.
Why did Trump win?
Trump increased his vote share across the board by almost every metric, from nearly every demographic to every state. He became the first Republican in 20 years to win the popular vote. The why behind this sweeping victory will take time to study and understand. Speaking to one voter in a state that voted 59% for Trump, the answer came back in large part to one thing – the economy.
But by most measures, the US economy is better off than almost any other global economy.
The Biden administration has been able to bring inflation down to 2.4% with only 4% unemployment, while real GDP has grown annually by nearly 3%. Compare that to the UK, which has barely seen any positive GDP growth over the same period.
READ MORE: ‘Five lessons for Starmer’s Labour government from Trump’s victory over Kamala Harris’
The person I spoke to said that while they didn’t know anything about how other countries were doing, what they did know was that, “The prices of groceries are still high even though we don’t have supply and demand issues. Housing is still high, no one can afford rent, but even with them raising wages – everything is still really expensive and no one‘s getting paid enough to afford it.”
This sentiment seems to go against what we see in the official statistics. Yet, this is at the heart of the idea of the human-felt economy.
I wrote previously that the way politicians speak about inflation is unhelpful. In the eyes of many UK voters, falling rates of inflation have been erroneously taken to mean prices are falling. Therefore, when voters go to the supermarket and do not see lower prices, they feel misled. This has led to high inflation playing a part in the downfall of nearly every government that had to preside over the 2021-2023 inflationary period and then go to the polls after, from Australia to Britain, Germany, Italy, and Japan.
In people’s minds, Harris was strongly associated with what people thought of ‘Bidenomics’. What seems clear from the election results is that people were not happy about the economy, growth or no growth. Their economic experience told a different story. It seems that the fact that Biden and Harris were in charge during this period of inflation period was enough.
A human-felt economy
Rather than the economy not being a priority for voters; it seems it was as important as ever. But, instead of it being the economy of economists, it was the human-felt economy that likely swung it for US voters – “That’s your bloody GDP. Not ours”, to quote an infamous heckle during the Brexit referendum.
Or, in this case, ‘That’s your bloody falling inflation rate, not ours.’ The Democrats’ warning cries of a failing democracy and a stripping of women’s rights did not seem to permeate effectively enough against the cost of rent, gas and groceries. For more voters across nearly every state and demographic to vote for Trump this year than four years ago shows that for people it wasn’t about the threats of the future; it was about the economic present.
What can Labour learn from this? For one, Labour owes its recent rise to the same inflationary environment that may have helped to unseat an ideologically aligned US ally. But the lesson should be clear: growth alone isn’t enough if people aren’t feeling it.
READ MORE: ‘As Trump returns to the White House, the Western centre-left will need to do some soul searching’
The government has championed an agenda of growth while pledging not to raise taxes on ‘working people’. Over the next five years, though, the challenge will be: will voters reward a cautious approach if, even without higher taxes, everything else feels worse? Likely, not.
This US election may also have direct implications for the UK economy. If Trump goes ahead with a proposed 20% flat tariff, the UK economy could take a 0.7% GDP hit in the first year alone. Labour may also face pressure to increase defence spending while at the same time trying to generate growth that’s felt by the UK public. Keeping inflation low may be critical to achieving this.
There is still a lot to unpick from the US election. However, it seems clear that American voters did not see Harris’s economic track record as convincing, and were willing to put aside whatever reservations they had about Trump. Maybe not ‘it’s the economy, stupid’, but ‘it’s MY economy, stupid’.
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