What's bad for the U.S. economy is good for Donald Trump's campaign fortunes.
As a populist and a challenger to the incumbent Democratic Party, Trump would be well positioned to win the presidency if the U.S. economy tips into recession this year, a possibility that economists see as an increasing risk.
"If Trump were to become the Republican nominee, and we do get this recession, it would definitely increase the chances that people would vote for Trump," said Gabriel Lenz, a University of California, Berkeley political scientist who has studied voter behavior.
Both Trump, the brash billionaire Republican, and Sen. Bernie Sanders, the Democratic socialist, would get a boost in their primaries from a downturn, election research suggests, but a recession this year would reshape the general election in Republicans' favor, perhaps decisively.
Over the past few weeks, a number of leading indicators have signaled a higher, although still low, probability that the seven-year-old recovery could come to an end in an economic contraction in the months ahead.
Most notably, stocks have fallen, with the Dow Jones Industrial Average down nearly 6 percent in 2016. Industrial output has fallen over the past year. The dollar has surged. The Treasury yield curve has flattened, meaning that yields on long- and short-term securities have converged, an indicator that some economists view as one of the most reliable signals of oncoming recessions. Deutsche Bank's staff economists, for instance, wrote last week that it meant that "we should not dismiss the risk of recession."
Federal Reserve officials saw the movements in financial markets and commodities as "increasing the downside risks to the outlook" at their January meeting, minutes released Wednesday show.
Other indicators, however, suggest that the economy is still strong. Most notably, job growth in recent months has remained robust. "With solid domestic fundamentals, the probability of a recession in the U.S. in 2016 is only about 20 percent," PNC economists Stuart Hoffman and Gus Faucher wrote in a note Wednesday.
If the economy slips, however, it would profit Trump.
Evidence from past U.S. elections, such as Lenz's own work, suggests that voters tend to factor the economy's recent performance disproportionately heavily in their decisionmaking.
Specifically, voters tend to judge incumbents on economic conditions in the six months or year before the election, rather than during their entire tenure. And that last-minute judgment drives roughly half of the variation in election outcomes.
So it's a realistic prospect that Trump could be ushered into office by a small or temporary downturn by merit of being a Republican. That could be the case although a Democratic president presided over a nearly eight-year recovery from the financial crisis.
If there were to be a recession this year, Trump or another GOP nominee likely would enjoy a greater tailwind than Mitt Romney did in 2012. Then, President Obama presided over an economy that was only weakly recovering from the recession, with unemployment hovering near 8 percent and families struggling in the wake of the housing crisis. Yet, the trend was in the right direction for Obama to hold onto office.
"A slowdown in growth, that's not quite as fast — that's ambiguous. Roaring growth — that should be great for the Democrats. But recession, actually negative growth, that's the situation that really hurt the incumbent party," said Andrew Healy, a professor of economics at Loyola Marymount University. "Not just incumbent candidates, but would hurt a Democrat."
As an outsider who has appealed to economically disadvantaged voters with populist proposals regarding trade, immigration and a host of other issues, Trump could have special appeal for a Republican. "You'd have both of those things operating in Trump's favor," Healy said. "People would be disenchanted with the economic performance of the incumbent administration, and you'd also have potentially a little bump from Trump having a populist message."
Already, survey results indicate that Trump is the candidate most trusted by voters when it comes to economic growth. If the economy deteriorates in the upcoming months, he would be positioned to capitalize. Goldman Sachs economist Alec Phillips wrote in January research that growth in the second-quarter gross domestic product and job growth "appears relevant to election outcomes."
A financial crisis and deep recession helped Obama, a first-term senator, gain office in the first place.
Another recession, even a small one, could again tempt voters to turn to an unlikely outsider.
"It's hard to know for sure, but it looks like [voters] are willing to take big risks even when there are short downturns in the economy," Lenz said.