What is the economy telling us about the midterms?

Reading the economy’s signals can often be bewildering, especially in an election year. Consumer sentiment is down, but economic statistics remain relatively strong. The stock market is regularly reaching new all-time highs. What is America to make of this, heading toward November’s midterms?

Recent consumer and voter surveys all point to dissatisfaction. According to Gallup, only 59 percent of Americans expect high-quality lives in the next five years — the lowest reading since Gallup started polling the question almost 20 years ago. Gallup also found that current life satisfaction rating is low: Only 62 percent say they are now satisfied.

Rasmussen also found that, more than a year into President Trump’s second term, 56 percent of respondents say they are not better off. The Conference Board’s Consumer Confidence Index recently fell to its lowest level (84.5) since 2014. 

In contrast to consumer readings, economic statistics are comparatively strong. U.S. inflation slowed to 2.4 percent in January and remained there in February, down from 2.7 percent in December and lower than expected. Median weekly real earnings in 2025’s second and third quarters are higher than 2024’s fourth quarter, and with the exception of the 2020 pandemic blips, are the highest ever; this means Americans are earning more in real terms. 

In January, the unemployment rate fell to 4.3 percent before ticking up slightly to 4.4 percent in February, but it remains low and has stayed within a narrow band since November 2024.

The American economy grew a whopping 4.4 percent rate in the third quarter and 3.8 percent in the second quarter of 2025 — the two largest consecutive quarterly increases since the COVID-affected rebound of late 2021. And while 2025’s fourth quarter came in slow at 1.4 percent (one percentage point being shaved off by the government shutdown), the last three quarters have averaged 3.2 percent increases — robust by any standard. 

Stocks regularly broke all-time highs in 2025. The Dow Jones Industrial Average crossed the 50,000-point threshold for the first time on Feb. 6. Other indices, such as the S&P 500, the NASDAQ and the Russell 2000 have also performed robustly. 

So, what gives? Why the disconnect? For one thing, a time difference exists between the three measures. Consumer sentiment reflects the comparatively “long” past and the perceived future; it is shaped over a longer period of memory and expectation. Simply put: What happened before and what you expect to happen affects how you are feeling now. 

Economic statistics reflect only the nearer past, and so they tend to be different from sentiment. 

Finally, stock market performance measures in “real time,” the here and now, the moment-to-moment. Economic statistics of past performance can affect stock prices, but the markets weigh this, along with all the information pouring in instantaneously.

In short, all these metrics measure different time-frames. 

Additionally, individuals’ political views are embedded in their sentiments about the economy. The Conference Board’s Consumer Confidence Index “increased by 2.2 points in February to 91.2.” However, it “revived among Republican and Independent voters in February … while Democrats were less optimistic.” Gallup’s polling on American optimism reflects a similar partisan divide.

The takeaway: Democrats’ sentiment appears to be reflecting more than just the economy. If so, theirs won’t likely change. Republicans’ concern should therefore be to ensure that their supporters’ sentiment remains high and that independents’ sentiment more closely approaches theirs than Democrats’. 

Looking ahead eight months, there are two questions regarding the economy and the midterms.

First, will Democrats run on the economy after all? At one time, Democrats were pushing “affordability,” believing their gubernatorial wins in New Jersey and Virginia showed the issue’s efficacy. However, their outrage over Immigration and Customs Enforcement operations has eclipsed their focus; note that this is why they have now caused their second partial government shutdown in a year.

It is unclear whether Democrats can pull themselves away from where their heart lies. And there are looming issues that could easily insert themselves between Democrats and the economy — an upcoming Supreme Court ruling on transgender athletes playing in girls’ scholastic sports is but one example.

Second, if the economy is to be the issue, is there time for economic improvement to influence voter perceptions before the midterms? As already shown, there are clearly positive economic signs. In just the housing sector, median sales prices have fallen to $405,300 in 2025’s fourth quarter, down from $419,300 in the fourth quarter of 2024. The average 30-year-fixed mortgage rate fell to 6 percent on Feb. 26, from 6.96 percent on Jan. 25, 2025. Will it continue? Will it be enough?

It all boils down to feelings versus facts. It takes time for the latter to affect the former. Democrats are pulling for the feelings. Republicans keep hoping that the facts improve and have time to sink in with voters before Election Day.

J.T. Young is the author of the recent book, “Unprecedented Assault: How Big Government Unleashed America’s Socialist Left,” from RealClear Publishing. Follow him on Substack.  

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