President Joe Biden is facing unprecedented pressure from some senior lawmakers to step aside and allow the Democrats to choose an alternative candidate to challenge Donald Trump in the November election following his disastrous performance in last week's televised debate.
Biden, who will turn 82 just two weeks after the November vote, has trailed his predecessor in most national polls, as well as in key battleground states, for much of the past year, with many voters citing his advanced age and perceptions of declining mental acuity.
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His unsteady appearance in last week's nationally-televised debate, as well as his frequent verbal pauses and inaccurate recollections of fact, have only added to concerns that he is not only unlikely to match former President Trump's energy on the campaign trail but perhaps may not be able to see out a second term should he emerge victorious on November 8.
The New York Times, in fact, reported Wednesday that Biden is now weighing whether to continue with his reelection effort, conceding to an unnamed "key ally" that if he is unable to turn around public opinion over the coming days, he may stand down. The White House denied the claim.
The Times also reported that Trump's lead over Biden in the polls of likely voters has widened to around six percentage points, with nearly three-quarters of those surveyed indicating his is "too old for the job".
However, even if Biden is able to convince voters that his debate performance was a blip, which he has put down to "fatigue" and a series of back-to-back European diplomatic visits, he might face an even bigger challenge in the fall that won't be overcome by a handful of successful television interviews.
Big economic concerns facing President Biden
That's because a key reading of U.S. economic growth just turned notably sour in June, even as inflation pressures remained stubbornly high heading into the summer months.
At the same time, cracks in the job market, as well as a pullback in consumer spending, are starting to give rise to concern that the economy could be heading toward recession over the second half of the year.
The Institute for Supply Management's benchmark survey of sentiment in the country's services sector, the biggest driver of U.S. growth, plunged to a four-year low in June from a nine-month high in May.
The headline reading, which Wall Street closely tracks, was pegged at 48.8 points, the lowest since May 2020 and well below the 50-point mark that normally signals contraction.
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"The last time the (ISM reading) was as weak as the second quarter of 2024 was in the fourth quarter of 2009, when the economy was just starting to dig itself out of the Great Recession," said Bill Adams, chief economist for Comerica Bank in Dallas.
More focused readings of new orders and hiring intentions were also in contraction territory, the survey indicated, while a measure of the prices paid by companies (which are then passed on to customers) remained stubbornly high.
Job-market cracks indicate weakening
The Labor Department also reported Thursday that the number of Americans filing for continued jobless benefits jumped to 1.85 million last week, the highest since November 2021.
Other readings suggest weakening growth as well, with the Atlanta Fed's GDPNow forecasting tool suggests a second quarter advance of 1.5%, only modestly ahead of the 1.3% pace recorded over the first three months of the year.
The Federal Reserve, in its years-long fight to tame inflation following the post-Covid cost-of-living surge, has lifted its benchmark lending rate to around 5.375%, the highest in more than two decades.
That's had a mixed impact on the economy thus far: The job market recorded its longest run of sub-4% unemployment since the late 1960s, but housing affordability has slumped to the lowest levels since 2007.
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Americans are also frustrated by the lack of progress in reducing inflation, particularly with respect to grocery prices, which by some measures have risen more than 20% from prepandemic levels.
Fed Chairman Jerome Powell and his colleagues have repeatedly warned that until they're convinced that inflation pressures are easing in a sustained manner, rates will remain high well into the end of the year and beyond.
“Because the U.S. economy is strong and the labor market is strong, we have the ability to take our time and get this right,” Powell told a central banking forum in Portugal earlier this week.
Autumn interest-rate-cut questions
But even if the economy isn't strong and the job market does begin to weaken into the autumn, the Fed might not be inclined to cut rates during an election cycle that has put its decisions squarely in the frame of the national economic debate.
That could prove exceedingly difficult for Biden, as well as his Democratic colleagues, to lean against over the final months of the campaign, particularly if growth is slowing and inflation remains elevated.
Reaction in the bond market, meanwhile, suggests investors don't have much faith in Biden's ability to win that debate either. Investors have executed a major selloff in U.S. Treasury securities in anticipation of a Trump victory, which could bring more corporate-tax cuts, higher tariffs on imported goods, and renewed pressure on the independence of the Federal Reserve.
Both candidates, of course, would also be faced with a rapidly advancing level of domestic debt, currently pegged at around $35 trillion, as well as overall spending plans that nearly every economist considers unsustainable.
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Biden may argue that his longer-term plans will reduce that figure, without affecting entitlement spending, but a bond market that has suddenly found itself smack in the middle of presidential politics is unlikely to respond favorably.
And voters, eager for details as to how and when their monthly bills will be cut, aren't likely to give much consideration to debt levels that won't be satisfied for many decades. If indeed they will at all.
That leaves the president vulnerable on what was once his strongest footing – the surprising resilience of the U.S. economy – while he also attempts to assuage concerns that he's too old to correct it.
The Times reports that Biden will spend the next days reaching out to senior Democratic Party advisers and colleagues in order to rescue his flagging campaign before making a final decision on his candidacy.
Any further weakening in the economy, however, or suggestions of a long-overdue recession from data releases in the coming months, might have a much bigger impact on his prospects.
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