Ben Casselman, chief economics correspondent, discusses the latest economic data ahead of the midterm elections

October 21, 2026

The economy is the issue voters cite most often ahead of the midterm elections. President Trump has argued that voters are wrong to be frustrated about the cost of living. He has said the economy is the strongest in the country's history, that oil prices are much lower, that inflation is almost nonexistent, and that the government has collected trillions of dollars. He has also said that Americans have more jobs than ever before.

The latest batch of economic reports, released in the week before this discussion, provides what is likely the final major economic snapshot before the midterms. The reports include retail sales, weekly unemployment insurance claims, industrial production, and several inflation measures.

Chief economics correspondent Ben Casselman says the data shows real strengths alongside a clear weakness: affordability.

The Three Components of Affordability

Casselman identified three measures that together describe the cost of living for a typical American family:

1. Inflation: the rise in prices for goods and services
2. Interest rates: the cost of borrowing money
3. Income: wages and the amount workers and families receive each month

Inflation

Inflation, measured by the Consumer Price Index (CPI), reached 9% in 2022, its highest level in 40 years. By the time Trump took office in January 2025, inflation had fallen to about 3%. Most economists expected it to continue declining toward 2%, which is generally considered normal.

Instead, inflation stalled near 3% after the administration imposed tariffs, which are taxes on imported goods. Tariffs add to costs for businesses and consumers. Inflation did not rise sharply, but it did not improve.

The situation worsened after the United States went to war with Iran. Oil prices spiked after the Strait of Hormuz, a key shipping route for global oil, was shut down, and global oil supplies tightened. Gasoline reached $4 to$4.50 per gallon, and diesel prices hit record levels.

The effects extend beyond the gas pump:

• Heating oil prices were up 74% from a year earlier.
• Airfares rose sharply because fuel is a major cost for airlines.
• Diesel, which transports goods by truck and powers farm equipment, raises the cost of food and other products throughout the economy.

Inflation for September, reported the previous week, was 3.7%. Casselman noted that this is far below the 9% peak of 2022, but it moved in the opposite direction from the reduction Trump promised on the campaign trail.

Interest Rates

The Federal Reserve, the central bank, manages inflation mainly through interest rates. It raises rates to slow the economy when inflation is high and cuts rates when inflation eases.

As inflation fell, the Fed began cutting rates, which made borrowing easier for consumers and businesses. When inflation rose again, the Fed stopped cutting. In September, it raised rates for the first time in three years.

Higher rates increase the cost of credit card balances, auto loans, and business loans for equipment and factories.

Mortgage Rates and Housing

Mortgage rates are driven largely by the bond market, which responds to inflation. The average rate on a 30-year fixed-rate mortgage was below 3% during the pandemic. It rose to between 6% and 7% in later years and began to decline early in 2026. Rising inflation then pushed rates back up. The rate on a 30-year mortgage is now about 7.5%.

Many prospective buyers who had saved for a down payment and expected lower rates now face higher monthly costs. Casselman said many younger Americans believe they will never be able to buy a home, and that interest rates are a major factor in that belief.

Wages

Wage growth has slowed significantly. Average wage growth was about 4% a year ago and is now 3%. Over the same period, inflation has risen from about 3% to about 4%. As a result, the real value of paychecks, meaning pay adjusted for inflation, is falling. By some measures, wages adjusted for inflation have not grown since Trump returned to office.

In the post-pandemic period, wages rose quickly alongside prices. That is not the case now.

Economic Strengths

Casselman described several areas of strength:

• Business investment and profits have been strong.
• Stock market indexes have reached record highs repeatedly.
• New business formation has increased.
• Consumer spending has remained solid. Retail sales were up more than 6% from a year earlier, faster than expected.

Dependence on AI Investment

Much of the business investment is tied to artificial intelligence (AI), particularly the construction of data centers and the power plants that supply them. Casselman said this concentration creates risk. If enthusiasm for AI declines, investment could fall, the stock market could drop, and construction and employment tied to data centers could decline. Such a sequence could lead to a recession.

Some data center companies have recently faltered. Casselman said no one is yet predicting that the AI market will burst, but the risk of a sharp pullback is a concern.

Labor Market

The unemployment rate was 4.2% in September. It has been at or below 4.5% for five consecutive years, the longest such period on record. The previous record ran through the 1960s.

Casselman described the labor market as a "low hire, low fire" market. Employers hire few new workers and lay off few existing ones. Workers have fewer opportunities to change jobs, and job changes are a common way to secure large raises. Fewer job changes contribute to slow wage growth.

Casselman said it is a bad time to look for work but not necessarily a bad time to hold a job. Being employed is better than being unemployed, but the current market does not deliver consistent gains in pay for most workers.

Why Consumer Spending Remains Strong

Economists have expected consumers to reduce spending because prices remain high. Casselman said that has not happened and that the reason is not fully understood. He identified two factors:

1. Employment: Most people still have jobs, so most can continue spending even if they are concerned about the future.
2. Stock market gains: A majority of Americans own stock, either directly or through 401(k) retirement plans. Stock wealth is concentrated among the wealthiest households, which hold most of the market's value. Their rising portfolios have given them confidence and financial flexibility to keep spending.

Generational Divide

Casselman said the economy is divided between groups that are doing well and groups that are struggling. He described the generational gap as one of the sharpest.

Baby boomers approaching retirement generally hold substantial home equity. Many have paid off their mortgages or locked in low rates. Many also have investment portfolios that have grown, savings that earn higher interest, and Social Security benefits, which are adjusted for inflation.

Casselman cautioned that many older Americans are struggling. However, in aggregate, older voters are doing relatively well and younger voters are not. He added that older voters are often the parents of younger voters, and many older voters say they worry about their children and grandchildren. That concern shapes their view of the economy even when their own finances are stable.

Perception and Political Messaging

Casselman compared the current situation with 2024. The Biden administration argued that the economy was strong despite high inflation. Voters did not accept that message. Casselman said wages had not kept pace with inflation during that period, and voters were unhappy about it.

He said the Trump administration is now making a similar argument: that the economy is strong and that inflation and gas prices are the main problems. Casselman said voters again do not accept that message. He also said voters are partly correct, because the cost of living remains a serious problem regardless of other economic indicators.

Presidential Responsibility

Casselman said presidents have limited control over the economy. Some problems, including the inflation issue and the low-hire, low-fire labor market, predate Trump's current term.

However, he said Trump adopted specific policies that directly raised prices: tariffs and the war with Iran. Casselman said the merits and trade-offs of those policies can be debated. He said there is no question that both raised prices at a time when Americans are highly focused on the cost of living.

Government Debt and Interest Costs

Higher interest rates affect the federal government as well as households. The government's borrowing costs have increased significantly while federal deficits remain large. The federal government now spends about $1 trillion a year on interest payments on its debt.

Casselman said these costs could limit future policy options, including:

• Responses to the economic effects of AI
• Funding for healthcare and childcare
• Future tax cuts under a Republican administration

The Midterm Elections

If Democrats win a large majority, as some polls suggest, and take control of both the House and the Senate, they would gain significant power to check Trump's agenda, Casselman said. He declined to predict which policies Democrats would pursue or where they would succeed in blocking the administration. He said a Democratic majority could still produce policies with a real effect on the economy.

Casselman also said many of the underlying problems are long-standing structural issues. He said he finds it difficult to imagine that Congress could resolve them within two years. Housing affordability, childcare costs, and wage growth are unlikely to change substantially in that period. High interest rates further constrain the federal government's ability to act.

Key Figures

Conclusion

Casselman said the latest data is not only a snapshot of current conditions. He said the underlying pressures that many voters describe are likely to persist well beyond the November election.

Other News

• Campaign spending: On Tuesday, Trump announced that he would spend $100 million to support Republicans, likely through a super PAC, a political committee that can raise and spend unlimited sums on election campaigns. The spending is in addition to the$300 million that Trump said his political operation has already spent. The midterm elections, two weeks away, are on track to become the most expensive in U.S. history.
• Democratic fundraising: The Democratic National Committee has faced financial difficulties. Michael Bloomberg, the billionaire former mayor of New York, announced that he would give roughly $80 million to Democrats.
• Yemen: The Houthis have besieged Taiz, one of Yemen's largest cities, cutting off access to food, water, and fuel. Officials warn of a potential humanitarian catastrophe. The siege is in its third week. It is part of a wider conflict between the Iran-backed Houthis and the Yemeni government, which is supported by Saudi Arabia. On Tuesday, the British government said it would send fighter jets to help Saudi Arabia defend cities and critical infrastructure against Houthi missile and drone attacks.