Battleground states Trump won in 2016 face economic woes ahead

Alex Tanzi and Gregory Korte

Midwestern states that were key to President Donald Trump’s victory in 2016 are likely to see an economic downturn early next year that could affect his re-election chances, according to new central bank data.

The economies of seven states – including Michigan, Ohio, Pennsylvania and Wisconsin – are projected to contract over the next six months, data from the Federal Reserve Bank of Philadelphia show.

Presidents seeking re-election do well when the national economy is growing, but are endangered in times of economic downturn. The state-by-state data show a more complicated picture for Trump: The Fed study expects the national economy to grow by 1.48% – but with slower growth in battleground states that Trump most needs to win.

UAW members strike at the GM Romulus Powertrain plant in this October 16, 2019, file photo. Local information is more volatile than national data to voters, and single events can greatly affect the state economies. Recent trade uncertainties and the General Motors strike likely contributed to the expected weakness in the Rust Belt states that could affect President Trump's re-election chances.

That’s important because political scientists have found that local economic conditions can be more powerful than the national economy in determining people’s votes.

“The information that people are going to get about the state of the economy is going to be different in different states,” said Christopher Wlezien, who studies public opinion on the economy at the University of Texas at Austin. “They don’t rely on just what’s happening to them. They care about what’s happening around them.”

The early primary states of Iowa and New Hampshire are expected to see tepid growth over the next few months, according to the Fed bank, which released six-month leading indexes for the 50 states Friday.

The other states forecast to contract are West Virginia, Rhode Island and Wyoming. The Fed bank projects that the economies of 43 states – led by South Carolina – will expand over the next six months.

The leading index predicts the six-month growth rate by analyzing state-level housing permits (1 to 4 units), state initial unemployment insurance claims, delivery times from the Institute for Supply Management (ISM) manufacturing survey, and the interest rate spread between the 10-year Treasury bond and the 3-month Treasury bill.

The data don’t predict recessions in Michigan, Pennsylvania, Wisconsin and Ohio – rather it shows the states may be entering a weak period in their business cycles.

The local information is more volatile than national data, and single events, such as hurricanes, plant shutdowns, or temporary spikes or declines in demand for a particular product, can greatly affect the state economies.

For instance, recent trade uncertainties and the General Motors strike likely contributed to the expected weakness in the Rust Belt states.

The Fed indexes show that states in the southwest have performed the best since Trump became president.

Nevada leads all states, with Utah, Arizona and New Mexico among the top ten. Large population states of Florida and California are ranked 7th and 4th.

South Carolina is the 6th best-performing state and is expected to lead the nation over the next six months.