OPINION:
With the summer half gone and midterm elections coming into focus, Republicans might wish Americans would concentrate more on the upcoming football season and less on their gripes with incumbents.
The economy is an eyesore to most voters, and they blame President Trump. Look at the polls.
According to RealClearPolitics, 38% of voters rate the president favorably on the economy, while 59% rate him unfavorably.
Kalshi puts the odds of the Democrats capturing the House at 82%.
Despite a Senate election map that favors Republicans this cycle, Democrats are on the attack in red states such as Ohio and Texas.
The math is simple: Rocketing gas prices and tariffs have pushed up consumer prices 1.6% since February, while wages have gained just 1.0%.
Until the Iran war began, the story was different.
During Mr. Trump’s first 14 months, wages were outpacing prices faster than during President Biden’s tenure.
Layoffs have slowed, but fears remain high.
Last year, artificial intelligence and the fallout from pandemic overhiring combined to create a listless jobs market.
Many CEOs, such as Jack Dorsey at Block, pointed to the need to remain competitive by exploiting the potential improvements in worker productivity AI affords, whereas skeptics believe they are whitewashing hiring blunders.
That cleanup is likely now receding, but AI continues to shake up the nature and availability of work.
The victims often joined their former employers when they had other options in a robust jobs market but now face a stagnant environment.
Jobs separations — the combination of voluntary quits and firings — are lower than during Mr. Trump’s first term and Mr. Biden’s presidency. More than one-quarter of job seekers have been out of work for at least six months.
It is a terribly bifurcated situation, or economists’ dirty talk for a K-shaped economy.
Generally, workers cannot negotiate meaningful wage increases to keep up with galloping gas and beef prices, because AI gives employers a powerful lever: fear.
An increasing number of households have incomes above $150,000, but the number of folks relegated to part-time work who would prefer full-time work has risen.
Business investment is bifurcated too.
Hyperscalers — Alphabet, Meta, Microsoft, Amazon and Oracle — are spending an estimated $800 billion on AI, up from $380 billion last year.
That represents 2.4% of gross domestic product, but on a net basis, investment in the rest of the economy is not growing. Uncertainties created by the Iran war and the legal status of Mr. Trump’s tariffs make business planning terribly difficult.
AI is creating a boom for the folks who build data centers, firms that sell construction equipment, and U.S. manufacturers of semiconductors, other computer components, power generation and cooling systems, and fiber-optic cables.
Vertiv, which makes power management, cooling and rack server infrastructure, has announced a new factory in Pelzer, South Carolina.
Generac makes large electric-power-generating and backup systems and is expanding in Wisconsin.
Sleepy glassmaker Corning and bathroom fixture manufacturer Kohler have turned into attractive bets thanks to their fiber-optic and industrial engine/power generation businesses.
Elsewhere, construction and factory expansion are not happening.
Until recently, the bifurcation theme echoed in equity markets too.
From 2022 to 2024, the Mag7 — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — posted an average annual profit gain of 19%, whereas the other 493 companies that make up the S&P 500 posted only 3% profit growth.
The contrast is easing, though.
In 2025, Mag7 margins jumped 22%, and the other 493 businesses by 10%; for this year, FactSet estimates those figures will be 25% and 16%.
For Americans attached to the AI boom and owning substantial stock market accounts, these are good times. For those who are not so fortunate or savvy, these are unsettling or bad times.
Most voters will not give Mr. Trump and congressional Republicans much credit for ChatGPT, Anthropic, Nvidia and their cousins in the AI agent industry, but they will tag them for not addressing the negative side effects: declining real wages, unemployment, ruthless CEOs and the like.
Thirty-eight percent of households do not own stock. Add in those whose holdings are mostly in tax-sheltered retirement accounts and cannot take out profits to pay bills without incurring penalties or inadequately funding retirements, and the stock market boom will not do much for incumbents this fall.
The Republican Party is supposed to be advantaged by the redistricting wars, picking up 14 House seats versus eight for the Democrats, but that gerrymandering often makes other congressional districts more competitive.
With Democratic voters willing to walk over hot coals to get to the polls this year and Mr. Trump’s tariffs and war-inflamed inflation leaving the Republican mainstream uninspired, it would not take a big lift for Democrats to pick up many of those now less-Republican-leaning districts.
Mr. Trump could wake up a lame duck on Nov. 4, facing a blue House and Senate in January.
• Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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