Biden’s Economy Looks Strong. Except in Georgia, Arizona, and Other Key Swing States.

While none are really struggling, most of them have lagged behind the national average in terms of overall growth. And most are lagging national averages in other measures, including inflation-adjusted wage growth and consumer sentiment.

Biden’s polling in these states, which largely decided the 2020 election, reflects voter discontent: He is trailing Trump in every one, though polls have tightened lately and state-level polling is more sporadic than national ones, with the race still close.

A look inside these state economies provides a window into the national race. Voter perceptions of the economy aren’t the only driving force, but they have long been a key factor for presidents seeking a second term. As Bill Clinton’s campaign strategist famously put it in 1992, “it’s the economy, stupid.” Today, a more apt phrase may be: ”it’s the swing state economies, stupid.”

Growth and Trouble Spots

Since Biden took office in the first quarter of 2021, U.S. gross domestic product has gained more than 8% after adjusting for inflation. Two swing states, Nevada and Arizona, top the national average, both up more than 10%. North Carolina and Georgia lag the nation slightly.

Michigan, Pennsylvania, and Wisconsin have performed worse. Wisconsin looks like the biggest laggard with gains of just 3.1%.

One headwind: Many manufacturers in search of more flexibility on wages are building factories in “right to work” states, benefiting the South at the expense of union-friendly locales such as Michigan and Pennsylvania, says Julia Pollak, chief economist at ZipRecruiter. Many of those Southern states also have lower taxes, cheaper land, and fewer building restrictions.

Other headwinds include outward migration and aging populations, says Pollak. Michigan’s population has fallen 0.4% since April 2020, for instance. Pennsylvania has lost 0.3% of its people. Wisconsin’s population has increased 0.3%.

Wisconsin’s economy is one of the most dependent on manufacturing in the country. Even though it’s a right-to-work state, its manufacturing workforce eroded through most of last year. Some major projects, like the $10 billion Foxconn campus touted by Trump in 2017, failed to live up to their original billing.

Demographics have been a growth driver in Nevada and Arizona where the population has expanded 2.9% and 3.8%, since April 2020, ahead of the U.S.’s 1% increase. Those Sunbelt states have a “huge advantage,” Pollak says.

Employment Tailwind

One positive for Biden is that both national and state-level unemployment are near record lows. While the jobless rate in April rose to 3.9% from March’s 3.8%, it is still hovering around its lowest level in decades. By comparison, Barack Obama won reelection when unemployment stood at 7.7%, and George W. Bush won with 5.4%.

None of the swing states have unemployment above Obama’s or Bush’s levels. April data hasn’t been released for individual states, but five of the seven battlegrounds in March had a jobless rate that matched or was lower than the national average. Michigan has a rate a hair higher at 3.9%.

The big outlier is Nevada with an unemployment rate of 5.1% in March, the third-worst in the country behind California and Washington, D.C. The state’s economy is largely dependent on tourism and construction. It was one of the hardest-hit by the Covid pandemic and still hasn’t recovered to its prepandemic unemployment rate of 3.6%

Nevada government officials have chalked up the relatively high unemployment to labor force growth, rather than a sign its economy is suffering. “Most of the unemployed people that we have in the state, the majority, aren’t job losers. They are either someone who left a job or they are coming into the labor market,” said David Schmidt, chief economist of the state’s employment department in December.

Nevada is also growing at a rapid economic clip: Its GDP between the third and fourth quarter of 2023 grew at a 6.7% annual rate, the fastest in the country.

Inflation Is Falling, But Paychecks Aren’t Going as Far

Both politically and economically, inflation and loss of purchasing power may be Biden’s biggest vulnerabilities. Inflation rates in Georgia and North Carolina were slightly above the national averages in March, according to Moody’s data. The other swing states were below average.

While inflation has moderated, wage growth hasn’t kept up with consumer price increases. Wages nationally are up a cumulative 15.9% since he took office, trailing the 19.4% rise in consumer prices.

Things looks worse in most swing states. Only North Carolina and Wisconsin have posted above-average wage growth, while the five other swing states are below-average.

Georgia illustrates the positives and negatives. The state appears to be humming along economically with big gains in the auto industry as a new hub for electric vehicles.

Hyundai Motor Group

is plowing $12.6 billion into the state, including a $7.6 billion factory to build electric vehicles, both for domestic markets and exports. Overall, a manufacturing boom in the state has helped drive Georgia’s unemployment rate down to 3.1%.

Yet Georgia workers may not feel like they’re making more money. Between 2021 and this March, average hourly earnings in the state grew just 10.4%, trailing the national average wage gains, according to Barron’s calculations based on Labor Department data.

Lagging Consumer Sentiment

What ultimately matters when voters go to the polls is how they feel: whether they’re confident in their own financial situation and the economy. Nationally, the Morning Consult Index of Consumer Sentiment in April was at 93. It’s improved in the last few years, but it’s well below the February 2020 reading of 114, before the Covid-19 pandemic, and the Biden-era high of 100 in April 2021.

Consumers appear to feel less confident in most swing states. Only Georgia has an above-average confidence reading. One key factor, says John Leer, chief economist for Morning Consult, is that many voters remain pessimistic that their wages and purchasing power will catch up to inflation.

“Consumers hate inflation. They don’t expect to be made whole,” he says, noting that low and middle-income consumers were especially pessimistic in recent surveys.

It’s a stretch to say any of the swing states are ailing. Wisconsin, for instance, may have relatively low economic gains, but its wage growth and unemployment rates are better than the U.S. average. One could find similar bright spots in other battleground states.

With six months to go until the election, Biden has time to turn things around. Leaving inflation in the dust will be key to his re-election chances. Perhaps his biggest job will be convincing swing-state voters that the economy isn’t as bad as they think.

Write to Joe Light at joe.light@barrons.com and Megan Leonhardt at megan.leonhardt@barrons.com