Commentary: Why a booming economy is not helping Trump

LAND OF HAVES AND HAVE-NOTS

Broad GDP growth can fail to capture what people feel on the ground. Popular discontent reflects more granular details, like the fact that wage growth, adjusted for inflation, has turned negative in recent quarters. One key exception is workers with AI skills, who command wages up to 120 per cent higher than their peers.

So the sense of America as a land of haves and have-nots has an AI twist. 

Investment is growing around 25 per cent a year in AI-related industries, but by less than 1 per cent in other industries. Construction is contracting on average but growing at a double-digit pace for data centre projects.

This tide of money is lifting other businesses only if they find an AI angle – think of the Japanese toilet manufacturer that saw its stock price jump after it started making ceramics for computer chips. Now, on days when the stock market goes up, nearly half of the stocks go down – an unprecedented phenomenon.

Most voters have reasons to feel left out of the blessed AI circle. The wealthiest own the most stocks, and the mostly AI-driven gains are rising this year, creating a reverse Robin Hood effect. The 0.1 per cent are gaining more than the 1 per cent, who gain more than the 10 per cent, and so on down the income ladder. Similarly, mortgage delinquency rates are rising on a sliding scale, fastest in the least wealthy neighbourhoods.

Since World War II, a booming economy has tended to cap midterm losses for the president’s party. Historically, when growth has accelerated towards 4 per cent before an election, the incumbent rarely lost control of either house of Congress and lost control of both just once, in 1954. 

Should the Republicans get swept aside this year, Trump – who rebuilt the Republican Party as a vessel of anti-incumbent anger – will have turned his party into a target.