The biggest midterm takeaway: The economy is stronger than we thought

The day after the midterm elections, I was at a small business client, and of course everyone was talking about the results and how the Democrats had done much better than expected.

One woman, Linda, said something that really caught my attention. She said she voted for Lt. Gov. John Fetterman (D-Pa.) because of his stance on abortion. Another person, David, said the same thing and that he was also concerned about some of the more radical Republicans. I heard similar stories from other employees discussing how they voted, ranging from a distrust of former President Trump to concerns about voting rights. But you know what wasn’t mentioned? The economy.

Linda makes about $50K per year. David makes about the same. Aren’t these the people who are most affected by a “slowing economy,” “high inflation” and “declining markets”? You would think so. You would think that they would be so upset by what’s happening to their pocketbooks that they would be voting for a change.

But no, these people didn’t vote with their wallets this time. Their concerns were other, non-economic issues. Why? Because if there’s one takeaway that resonated the most from the midterms it is this: Maybe the economy isn’t so bad.

Take my client, a 150-person manufacturer located in New Jersey. 2022 was a profitable year for them. They added employees and are looking for more. They bought equipment and inventory. They raised prices and were also the recipient of price increases. They did so good this year that we had to increase their estimated tax payments so they wouldn’t be hit with a big bill come January. Sure, they’re concerned about 2023’s prospects, but that’s not uncommon coming off a good year and looking to an uncertain future.

And what about their employees? We read that inflation is at 8.2 percent and the prices of groceries and gas have “skyrocketed.” But, according to recent data from payroll company ADP, the employees and their customers saw an average pay increase of 7.7 percent over the past year. And those who took part in the “Great Resignation” by switching jobs were rewarded with an average 15 percent increase in their pay.

Taking these numbers into consideration, it seems most employers are stepping up to keep their employees about on par with inflation. You can’t blame them. With unemployment being so low and job openings so high (another reason workers don’t seem so worried about the economy), businesses have to do whatever they can to retain their best talent.

I live in center city Philadelphia. The restaurants here are busy. Retail shops on Walnut Street have claimed the vacancies that struck our shopping center after the 2020 riots. More people have returned to their office buildings (or are working from home on a hybrid schedule). Diners are spilling out of expensive steak houses on Broad Street. The airport, like the other two-dozen airports I’ve travelled to over the past six months, is packed with travelers, which should come as little surprise considering that the Transportation Security Administration is reporting that the number of airline travelers is at or above pre-pandemic levels. More than a few hotels I’ve stayed at have been sold out.

And yes, the price of gas is higher. But this isn’t the 1970s, when my dad’s car got 27 gallons to the mile. It may cost more to fill up, but that tank goes a lot further thanks to the fuel efficiency of today’s cars.

So, where’s the recession? GDP was up 2.6 percent this quarter. Household wealth, despite taking a hit thanks to market declines, remains at historically high levels, as does consumer spending. Retail real estate is enjoying its “biggest revival in years,” according to a recent report. Manufacturing is down, but the services industry now employs more people than before the pandemic and remains strong. The stock market has declined, but when is the stock market ever a reliable indicator of the economy? Small business confidence fell a little in October for the first time in four months. The real estate industry is suffering thanks to higher mortgage rates and a precipitous rise in housing inventory. But let’s admit that 2020 and 2021 were banner years and let’s also hope that those realtors saved a few bucks from then.

Instead of relying on surveys that dubiously measure “optimism” and “confidence,” I’ve found that there’s no better place to get a gauge on the economy then by looking at data from real-life banks. And the data, as of Sept. 30, is good.

Wells Fargo CEO Charles Scharf says that “both consumer and business customers remain in a strong financial position.” JP Morgan Chase CEO Jamie Dimon, who is not exactly an economic optimistic, admitted that consumers are “healthy” as “plentiful job opening and still-ample household savings for now kept credit card spending up and bad loans low.”

Things aren’t all rosy. Interest rates are increasing, inflation remains stubbornly high, the tech industry is collapsing, capital is harder to come by and corporations seem to be warming up for big layoffs. Thanks to a global economic slowdown, volatile energy prices, a war in Ukraine and lingering supply chain issues related to the pandemic, many economists are predicting a recession in 2023.

But let’s acknowledge that right now the economy doesn’t seem to be so bad. If it were bad, we’d see a lot more voters like Linda and Dave more concerned about their bank accounts than abortion or voting rights. That didn’t happen in these midterms.

Gene Marks is founder of The Marks Group, a small-business consulting firm. He frequently appears on CNBC, Fox Business and MSNBC.