Joe Biden Starts to Make His Economic Case

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    After suffering a horrible second half of 2021, President Joe Biden came out fighting last week. On Thursday, he marked the anniversary of last January’s Capitol Hill riot by placing the blame squarely where it should lie—at the feet of “the former President of the United States.” On Friday, Biden again took to a podium, this time to hail the Labor Department’s jobs figures for December, which, at first glance, seemed disappointing. Wall Street economists had been predicting that payrolls would increase by four hundred thousand; the actual figure was a hundred and ninety-nine thousand. “I think it’s a historic day for our economic recovery,” Biden declared. “Today’s national unemployment rate fell below four per cent, to 3.9 per cent—the sharpest one-year drop in unemployment in United States history. . . . And we have added 6.4 million new jobs since January of last year. . . . that’s the most jobs in any calendar year by any President in history.”

    Biden’s argument wasn’t just spin. A year ago, the unemployment rate was 6.7 per cent, and Jerome Powell, the chairman of the Federal Reserve, was describing the economic path ahead as “highly uncertain.” Last March, Congress, at the behest of Biden, passed the American Rescue Plan, a $1.9-trillion stimulus bill, which provided financial support for households, businesses, and state and local governments. The jobless rate is now below four per cent, and Powell and his colleagues at the Fed are preparing to raise interest rates on the grounds that the economy is approaching “maximum employment” and inflation has risen sharply.

    The inflation spike presents a grave political challenge to the White House, of course—in the twelve months to November, the Consumer Price Index rose by 6.8 per cent—but it’s only part of the economic story. For the past year, Biden and the Democrats have done a less than stellar job of emphasizing the other part of their record: in terms of jobs and income, the rebound from the economic plunge that accompanied the first wave of COVID-19 has been far more rapid than most economists expected. Last February, for example, the nonpartisan Congressional Budget Office predicted that the unemployment rate wouldn’t dip below four per cent until the first quarter of 2026—four years from now.

    The latest jobs report was stronger than it appeared, too. The Labor Department revised upward its numbers for employment gains in October and November. Although the December payrolls number, which is derived from a monthly survey of firms, didn’t meet Wall Street’s expectations, the accompanying monthly survey of households, which forms the other half of the monthly report, indicated that employment jumped by six hundred and fifty-one thousand. For various technical reasons, the figures from the two surveys aren’t directly comparable. But the Labor Department also releases an “adjusted” household-survey jobs number that is comparable with the payrolls figure. In December, it rose by three hundred and one thousand—closer to the rate economists predicted.

    In his remarks on Friday, Biden also emphasized that the labor-force-participation rate has rebounded significantly, and that workers, especially low-wage workers, have enjoyed substantial gains over the past year. “Women and men who work in the frontline jobs—in restaurants, hotels, travel, tourism, desk clerks, line cooks, waitstaff, bellmen—they all saw their wages at a historic high, the highest in history,” he said. “Their pay went up almost sixteen per cent this year, far ahead of inflation, which is still a concern.” The facts, though, back up Biden here. And they were also on his side when, taking another jab at a former President without naming him, Biden noted, “The stock market—the last guy’s measure of everything—is about twenty per cent higher than it was when my predecessor was here.”

    The political problem facing the White House is that there’s a huge disconnect between economists’ assessments of the economy, which are mostly positive, and the assessments of voters, which are far more negative. The polling data on this point are voluminous, so I’ll just cite a couple of recent examples. In an Economist/YouGov survey published last week, twenty-four per cent of respondents described the state of the economy as “Good” or “Excellent,” and sixty-eight per cent described it as “Fair” or “Poor.” In a CNBC/Change Research poll, sixty per cent of respondents said that they disapproved of Biden’s handling of the economy. Even more striking: fifty-eight per cent disapproved of his handling of jobs as an issue. This is despite record job growth last year and the fact that vacancies are near record levels. According to an analysis by Nick Bunker and AnnElizabeth Konkel, two economists at the data site Indeed, there are now more job postings for every single major occupational group than there were before the pandemic struck, which is extraordinary. “Workers are quitting to go take new, better-paying jobs. It’s not the Great Resignation—it’s the Great Upgrade,” Bharat Ramamurti, the deputy director of the White House National Economic Council, said on Twitter.

    How can the voter disconnect be explained, then? The standard answer is that many Americans are filtering virtually all of their economic news through the lens of inflation, which is currently running ahead of wage gains for many people who don’t work in the frontline sectors that Biden identified. Polling data back up this interpretation. In the Economist/YouGov survey, the pollsters asked people whether unemployment or inflation was the biggest problem facing the U.S. today. Just eleven per cent of respondents said unemployment, thirty-nine per cent said “Both equal,” and forty-three per cent said inflation.

    Rising inflation, particularly climbing gas and food prices, is clearly a very potent political issue, probably because it is highly visible and affects virtually everyone, and, perhaps, because Americans have got used to low rates of inflation. (Prior to the pandemic, the last time that the inflation rate reached six per cent was in 1990, when oil prices spiked during the run-up to the Gulf War.) Another factor, which shouldn’t be downplayed, is that Fox and other conservative media outlets blame Biden for the inflation spike even though it is a global problem largely fuelled by dynamics that he has little influence over—particularly global supply-chain logjams and the high cost of crude oil. In the CNBC/Change Research poll, thirty-eight per cent of respondents identified Biden as the main source of rising prices—above the pandemic and corporations. Among Trump voters, seventy-five per cent blamed Biden most.

    With the Labor Department scheduled to release the inflation rate for December on Wednesday, there could be more political trouble ahead for the President. At this stage, trying to win over ardent Trump supporters may be a lost cause, but the White House and other parts of the Democratic Party could do a more effective job of making their economic case to independents, to moderate Republicans who crossed over in 2020, and to Democrats who are down in the dumps after 2021. Biden’s spirited remarks on Friday represented a start, but he still has a lot of work to do.





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