Republicans' hopes this fall will rest on good economic news outweighing negative views of Trump

Key Points
  • Voters look favorably on the current state of the economy, but disapproval of President Donald Trump remains high.
  • While Trump's popularity ticked up following enactment of the tax cut in December, it remains below 40 percent in the most recent weekly average in the Gallup poll.
  • Republicans will need positive feelings about the economy to overshadow negative views of Trump if they want to hold onto Congress this fall.
Vice President Mike Pence (L) and Speaker of the House Paul Ryan (R) applaud as US President Donald J. Trump (C) arrives to deliver his first address to a joint session of Congress from the floor of the House of Representatives in Washington, United States on February 28, 2017.
Jim Lo Scalzo | EPA | Anadolu Agency | Getty Images

The economy has strengthened a bit since President Donald Trump addressed Congress last year. The political question of 2018 is whether that can strengthen his party a bit, too.

In a tight battle for control of Congress, the answer holds huge implications for the Trump White House. If November elections cost Republicans their House and Senate majorities, Democrats will block his agenda and perhaps even impeach him. The economic improvements he will hail in his State of the Union speech provide his strongest line of defense.

The improvements hardly represent the abrupt turnaround Trump suggests with his claim that America "is finally winning again." Falling unemployment and rising stock values continue trends Trump inherited from President Barack Obama.

In fact, the pace of new job creation slowed from 2016 to 2017 – an expected development as the economy draws closer to full employment. Although administration officials tout a return to 3 percent annual growth that the U.S. hasn't achieved since 2005, mainstream forecasters still see a long-term path of roughly 2 percent growth over the next decade.

"Things are better, but not dramatically so," says Douglas Holtz-Eakin, a Republican economist who advised President George W. Bush. "There's a tendency to overstate things."

Yet accelerating growth throughout an integrated global economy has put wind at the back of U.S. businesses. That has driven optimism among executives and investors, already high over the promise of reduced regulation from the Trump administration, even higher. More concretely, passage of a business-friendly tax cut late last year will pump $1.5 trillion into corporate profits and household bank accounts.

The result is swelling business investment and brightening near-term growth prospects. Independent economist Mark Zandi predicts 2.9 percent growth in 2018, with "reasonably good odds" of hitting the 3 percent mark that the president covets as proof of his success.

Ordinary Americans have noticed. In January's NBC News/Wall Street Journal poll, 69 percent called themselves at least somewhat satisfied with the state of the economy – the highest level recorded since the last month of President Bill Clinton's administration in January 2001.

But that has not markedly improved either the popularity of Trump or the electoral outlook for his party. Republicans and the president need it to.

Presidential job approval offers the strongest indicator of his party's fortunes in midterm elections. While Trump's popularity ticked up following enactment of the tax cut in December, it remains below 40 percent in the most recent weekly average in the Gallup poll.

In recent weeks, Republicans have narrowed the Democratic edge in voter preferences for control of Congress, albeit modestly. The average of polls on Real Clear Politics most recently showed Democrats with a 46.7 percent to 38.8 percent advantage.

Those numbers suggest that Republicans won't escape the historical tides that nearly always punish the president's party in midterm contests. A spate of 2017 special elections, in which anti-Trump women, minorities and young voters surged to the polls, suggest that the president's provocative conduct has made those tides even stronger. Special counsel Robert Mueller, who has already indicted one of the men who ran Trump's 2016 campaign, hasn't finished his Russia investigation.

That menacing backdrop makes touting economic improvements ever-more crucial to Republican midterm strategy. If the dozens of pivotal House and Senate campaigns will turn on far more than "the economy, stupid" formulation Bill Clinton once made famous, arguments about the uptick could make a difference in margins of Congressional control that promise to be very narrow.

Senate Democrats need a net gain of two seats to make Charles Schumer the new Majority Leader. But they only have three prime Republican targets while they defend eight of their own vulnerable members.

House Democrats need to gain 24 seats to hand Nancy Pelosi the speaker's gavel once again. That means winning most of the 40 Republican seats at high risk, even though many of those districts contain more Republican than Democratic voters.

Trump's speech on Tuesday night – even if he reads conciliatory rhetoric from his Teleprompter in flawless fashion – won't alter election outcomes more than nine months from now. But the arguments it contains about rising growth and incomes will offer a sign of how Republican campaigns will try to overcome the ways the president has weighed them down.

Watch the full State of the Union address on CNBC.com, and CNBC's Apple TV and Amazon Fire apps at 9 p.m. EST.

WATCH: Strong economy, low employment likely high points of Trump's address

Strong economy, low unemployment likely high points of Trump's address: George Mitchell