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Data: FactSet, Bureau of Economic Analysis; Chart: Jacque Schrag/Axios

A key indicator of the financial health of Americans has declined steadily for the last 14 months, in yet another ominous sign from the economy that Democrats will face tough midterm elections.

Driving the news: Real per capita disposable income the money consumers can spend after accounting for taxes and inflation is dropping sharply, according to government data released Thursday.

Why it matters: Pollsters, political scientists and economists consider this measure of the household buying power to be, perhaps, the single best economic predictor of election results. Rising real incomes tend to predict rising vote share for the president's party during the midterm elections, and vice versa.

By the numbers: Real meaning inflation-adjusted per capita disposable income fell to $45,490 in May, down 3.6% from the previous year.

The big picture: In a recent note attempting to ballpark the outlook for Democrats in the November elections, Goldman Sachs analysts found that "real disposable income is the strongest predictor of election results among the economic variables we consider."

Longtime Democratic pollster Mark Mellman said on the political podcast "Hacks on Tap" earlier this year that "people look at all kinds of economic indicators unemployment, GDP, growth. The one that is most important politically that people never look at, is change in real disposable income."

Yes, but: This isn't a foolproof predictor of election outcomes. Goldman analysts, for example, note that other key economic indicators such as the still-low unemployment rate historically would suggest that the Democrats should fare well.

The bottom line: Unless something drastic happens and the recent Supreme Court decisions and Jan. 6 hearings could qualify the Democratic party could be up against a whopper of a midterm wave.

Continued here:
Why declining disposable income could spell trouble for Democrats in the midterms - Axios