with Brent D. Griffiths

President Trump won the presidency on a pledge to engineer an economic turnaround in the Rust Belt. He hasn’t delivered, and those states may seriously damage his reelection chances.

Michigan, Pennsylvania and Wisconsin — the traditionally Democratic states forming the so-called Blue Wall that Trump captured in 2016 — are tilting toward Democratic nominee Joe Biden, polling averages show. Biden will win the White House if he recaptures that trio and doesn’t lose any states that went Democratic four years ago.

All three states are suffering more severe economic strain than the rest of the country. “Across the industrial belt from Wisconsin to Pennsylvania, private job growth from the first three months of 2017 through the first three months of 2020 lagged the rest of the country — with employment in Michigan, Wisconsin and Ohio growing 2% or less over that time compared to a 4.5% national average,” a Reuters analysis finds.

And counties in Midwestern swing states that took a chance on Trump after backing President Obama in 2008 and 2012 are faring worse. An analysis by the Economic Innovation Group finds that of those counties in the region that flipped to Trump, “61% are in relative economic decline. Nearly all the rest have increased their economic well-being since 2000.”

The forces weighing on the region predate Trump, but the president’s trade wars have also exacerbated pain for the farmers and manufacturers that make up key engines of the local economies.

“The way the president has personalized so many policy decisions leaves him vulnerable in places where they haven’t delivered the promised results,” Kenan Fikri, the Economic Innovation Group's director of research and policy development, tells me.

Fikri says the election outcome in the region will turn in part on “to what extent people give Trump the benefit of the doubt, or did his early promising of the world fall too short too quickly for people to trust him with their vote one more time?”

Take Wisconsin.

Trump pulled off an upset in 2016 when he won the state by less than one percent. The latest Washington Post-ABC News poll shows Biden leading there by an eye-popping 17 points, while the FiveThirtyEight polling average shows the former vice president ahead by 8.5 percent.

The spike in coronavirus cases to record levels there in recent weeks will be top of mind for some voters, if not most of them. But the Post-ABC poll showed Trump’s standing on the economy sliding steeply with Wisconsin voters. The president’s approval on the matter “is now roughly divided, with 47 percent approving and 50 percent disapproving,” Scott Clement, Dan Balz and Emily Guskin report.

“Last month, his economic rating was net positive by seven points,” they write. “Since September, the president has also lost his narrow five-point edge over Biden on who is better able to handle the economy, with 52 percent of Wisconsin voters now saying they trust Biden more on this issue, while 44 percent say they trust Trump more.” 

Economic facts on the ground in the Badger State explain the turn in popular sentiment. Twenty-three of the state’s 72 counties flipped from supporting President Obama in 2012 to Trump in 2016. They have not fared well, even before the pandemic struck: Just over a third experienced job growth from the first quarter of 2018 to that same period this year, according to data from the Economic Innovation Group.

Michigan, a more economically distressed state, tells a similar story.

Trump won the state by a fraction of a percent in 2016. Now, Biden is leading Trump there by 7 percent, according to the Post-ABC poll — less than the 8.1 percent lead the Democratic challenger enjoys in the FiveThirtyEight polling average.

Consistent with the narrower race the Post-ABC poll finds there, the survey shows Trump’s economic approval is in positive territory, 52 percent to 44 percent.

But the state’s economy has floundered in the Trump era. Employment growth has flatlined from the beginning of 2018 to the start of this year, the EIG analysis finds.

This year, voters in the state who flipped from Obama to Trump appear to be enduring more financial pain that the broader population. Compared to similar voters in five other swing states, consumer confidence among those in Michigan “saw the largest drop from the beginning of the year to Oct. 15 at a 36.4-point decline,” a Morning Consult analysis finds. “That’s significantly higher than the 22.7-point drop among all registered voters in the state.”

Trump’s tariffs on steel have failed to revive a key regional industry while dragging on manufacturing broadly.

The 25 percent tariffs on foreign-made steel made good on a campaign promise from 2016. But they “haven’t produced the steelmaking renaissance and robust job growth in America’s industrial heartland that Mr. Trump promised,” the Wall Street Journal’s Bob Tita and William Maudlin report

“What’s more, the tariffs have hurt U.S. manufacturers, including those in the automotive and appliance sectors, who say the duties on steel and aluminum continue to keep their metal costs higher than what overseas competitors pay.”

The levies produced a short-term bump after they were imposed in 2018, but the 6,000 industry jobs that yielded vanished by the end of 2019, the Journal reports. And higher prices “also made steel more expensive for manufacturers that buy it, leading to the loss of about 75,000 U.S. manufacturing jobs, according to a study released late last year by the Federal Reserve Board of Governors.”

Similarly, Trump’s broader trade wars hit manufacturing supply chains “in ways that the administration didn’t well anticipate, as they failed to acknowledge many domestic manufacturers rely on foreign inputs to make their products,” EIG’s Fikri says. “A number of these swing counties were on the front lines of vulnerability to dynamics like that.”

Market movers

GDP growth is expected to be impressive.

But the overall picture remains complicated: “Economists expect gross domestic product to rise around 7 percent in the third quarter, a sharp reversal from the historic and devastating second-quarter plunge of 9 percent,” Rachel Siegel and Andrew Van Dam report.

“But that doesn’t mean the economy has entirely healed, or that the pace at which the economy recovered in the third quarter will keep up in the final stretch of 2020 … For the economy to recover all that was lost in the previous quarter, third-quarter GDP would have had to surge and hit 10 percent, and even more to make up for smaller first-quarter losses — all far beyond economists’ expectations.”

Stocks dive again, complicating Trump's closing message. “The Dow Jones industrial average fell 943 points Wednesday and is down nearly 9 percent since Sept. 2,” Jeff Stein reports. "The sell-off began two weeks ago but intensified Monday. It has been triggered by a surge in coronavirus cases and the fact that the White House and Democrats are at an impasse over relief talks.

“Trump in recent days has touted the stock market as central to his 2020 reelection bid, frequently pointing to Americans’ 401(k) accounts and investment portfolios. The stock market’s sharp decline clouds this characterization.”

  • The new spike in coronavirus cases threatens more havoc.The nation is experiencing a coronavirus outbreak more widespread than occurred in the summer or spring, with hospitalizations increasing in 38 states and deaths beginning to tick up. The rise in covid cases raises the prospect of another wave of lockdowns that can cripple the economy.”

Coronavirus fallout

States faces worst cash crisis since the Great Depression.

The drop in tax revenue is going to force some tough decisions: “Nationwide, the U.S. state budget shortfall from 2020 through 2022 could amount to about $434 billion, according to data from Moody’s Analytics, the economic analysis arm of Moody’s Corp. The estimates assume no additional fiscal stimulus from Washington, further coronavirus-fueled restrictions on business and travel, and extra costs for Medicaid amid high unemployment,” the WSJ's Heather Gillers and Gunjan Banerji report.

“That’s greater than the 2019 K-12 education budget for every state combined, or more than twice the amount spent that year on state roads and other transportation infrastructure, according to the National Association of State Budget Officers.”

More from the U.S.:
  • At least 8,821,000 cases have been reported; at least 227,000 have died.
  • State and local leaders order new restrictions amid autumn’s surge: “State and local officials in Colorado, Idaho, Massachusetts and Texas are imposing new restrictions on schools, businesses and social gatherings,” Joel Achenbach and Karin Brulliard report.
  • Fauci expresses support for national mask mandate for the first time: “Questioned about his apparent hesitation by CNBC’s Shepard Smith, [infectious disease specialist Tony] Fauci said that he had hoped ‘we could pull together as a country’ and recognize the importance of mask-wearing without the government getting involved.” But when pressed on the topic, he agreed that he would support such a requirement, Antonia Farzan reports.
Automakers are accelerating back.

The return from the worst of the pandemic is faster than expected: “Even for an industry accustomed to boom-and-bust cycles, the speed of the auto sector’s recovery from the pandemic-related shutdowns last spring has surprised executives and analysts, who just six months ago were calculating how many months companies could survive,” the WSJ's Mike Colias and Nora Naughton report.

“The pace of new-vehicle sales over the past few months has rebounded to the strong levels seen before the crisis, despite slim pickings on dealer lots because of tight inventory. Car buyers are paying record prices for new wheels, with dealers citing strong demand for luxury vehicles and high-end pickup trucks.”

More from the corporate front:
  • Boeing deepens job cuts: “The company it is planning to shed 7,000 more jobs … The company reported negative free cash flow of $5.08 billion, better than analysts’ estimates and than the previous quarter’s negative $5.6 billion, according to FactSet,” CNBC's Leslie Josephs reports.
  • Frontier Airlines grinds out some success: “Frontier Chief Executive Barry Biffle remains bullish on the airline’s prospects, arguing that at a time when fewer business travelers are flying, his airline’s dependence on leisure travelers means it is better positioned to weather the downturn," Lori Aratani reports.
  • Gilead cuts 2020 sales outlook: The drugmaker cited “lower-than-expected demand and difficulty in predicting sales of remdesivir … Chief Commercial Officer Johanna Mercier said that although the United States saw a surge in covid-19 cases over the summer, many were younger people and hospitalization rates actually dropped,” Reuters's Deena Beasley reports.
  • Visa profit falls 23 percent: “The payments processor said total spending decreased 10 percent on a constant dollar basis, and the number of processed transactions tumbled 13 percent from a year earlier,” Reuters's Imani Moise and Niket Nishant report.
  • Ebay beats quarterly profit estimates: “The company said it expects fourth-quarter revenue in the range of $2.64 billion to $2.71 billion, while analysts estimate $2.54 billion, according to IBES data from Refinitiv. E-commerce firms and retailers with a strong online presence have witnessed a spike in demand as the pandemic has led more people to shop online,” Reuters's Akanksha Rana reports.

Election 2020

Biden wins the money race on Wall Street. 

The Democratic nominee topped Trump by pulling in more than $74 million from the industry. “The sum includes contributions that began in 2019 and continued through the first two weeks of October to Biden’s joint fundraising committees and outside super PACs backing his run,” CNBC's Brian Schwartz reports. "Former Goldman Sachs President Harvey Schwartz gave $100,000 this month to the Biden Action Fund, a joint fundraising committee for the campaign, the Democratic National Committee and state parties…

“Wall Street’s financial support for Biden is more than what Barack Obama received in his two presidential runs combined. It exceeds the amounts raised from Wall Street executives in support of Trump in both the 2016 and 2020 cycles. The total will be less than Hillary Clinton’s 2016 presidential run; she saw just over $87 million from the securities and investment industry.”

Pocket change

SoftBank sought to put off WeWork's $3 billion share purchase.

CEO Masayoshi Son told an executive "use whatever excuse" to delay a payout to shareholders: “The transcript, part of a Delaware court filing, provides new details on the decision by SoftBank to scrap a $3 billion tender offer to repurchase stock from existing shareholders, including founder Adam Neumann and employees,” Joshua Franklin and Anirban Sen report.

“A WeWork board committee that negotiated the tender offer sued SoftBank in April over that decision, accusing the Japanese company of ‘buyer’s remorse’ amid the coronavirus outbreak.”

PayPal will put $50 million into Black- and Latino-led investment firms: The money “is part of a $530 million initiative to combat systemic racism and police brutality,” the New York Times Michael J. de la Merced reports.

“The payments giant had been thinking about how to erase the racial wealth gap, something that other companies have also addressed, and hit upon supporting Black- and Latino-led venture firms. These investors provide crucial capital to entrepreneurs at a stage that PayPal itself can’t — it invests in Series A fund-raising rounds and later — and are focused on businesses that bigger venture firms have largely ignored.”

The regulators

CFTC to offer lower fines to offenders that cooperate.

New guidelines are expected to be released today: “The three-and-a-half page internal memo … builds on a series of other short guidance documents the agency has released in recent years on everything from its standards for cooperation to its expectations on how market participants should design compliance programs to avoid infractions,” the WSJ's Dylan Tokar reports.

“The latest guidance doesn’t make any substantive changes to prior policy, but appears merely to clarify that companies could be rewarded with lower fines if they follow the CFTC’s guidelines.”

Chart topper

Via CNBC's Carl Quintanilla: 

Daybook

Today:

  • The Bureau of Economic Analysis releases the third quarter GDP estimate 
  • The Labor Department reports the latest weekly jobless claims
  • Apple, Alphabet, Starbucks, U.S. Steel, Yum Brands, Comcast, Facebook, Anheuser-Busch InBev, Cheesecake Factory, Dunkin’ Brands, Kraft Heinz, Kellogg and Keurig Dr Pepper are among the notable companies reporting their earnings.

Friday:

The funnies

Bull session