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Republican ballot-box defeats in two states with fairly strong economies show that growth isn’t everything for U.S. voters.
It’s a warning sign for President Donald Trump’s 2020 re-election bid -- and for analysts trying to predict his chances based on statistics for jobs or incomes.
Democrats scored major wins in the off-year elections in Virginia and Kentucky this week, taking over Virginia’s Senate and House for the first time in a generation, and unseating the Republican governor in Kentucky (though he has yet to concede).
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That wasn’t supposed to happen, according to election models that rely on the economy to predict who will win. Those say that when times are good, voters are more likely to attribute the expansion to the incumbent party -- which in Virginia and Kentucky was Trump’s Republicans.
Predictive tools built by Moody’s Analytics -- which examined state-level data on personal finances, stocks and jobs -- and Oxford Economics, which focused on inflation and income gains, are both predicting a Trump victory for 2020.
Since 2017, both the neighboring states have seen job gains, rising incomes and house prices -- broadly reflecting trends in the wider U.S. economy, which is in its longest expansion on record. They’re not outliers.
The latest state-level data published by the Bureau of Labor Statistics on Thursday showed that Virginia’s economy grew at a 1.9% pace in the second quarter, putting it in the middle of the pack -- while Kentucky posted a 1% expansion. Both states have seen personal incomes grow more than 10% since the end of 2016, and Virginia also has one of the lowest unemployment rates in the country.
Tuesday’s election results prompted some Wall Street analysts to review their outlook for next year’s presidential vote.
Greg Valliere, chief U.S. policy strategist at AGF Investments, said that while the economy nationally may still favor Trump, the state-level outcomes point to other concerns for voters.
Yale University professor Ray Fair, the godfather of U.S. election economic modeling, has also said that priorities may be different this time.
To be sure, the economic models can’t be ruled out.
Kentucky, for example, remained largely Republican aside from the governor. The state has also lagged most of the country when it comes to personal income growth.
And in both states, the opioid crisis has been a major economic and social issue. In Virginia, overdoses of the drug have increased since Trump was inaugurated, while they’ve declined in Kentucky, data from the Centers for Disease Control and Prevention show.
--With assistance from Alex Tanzi.
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