WASHINGTON (AP) — President Joe Biden continues to see good economic news and poor general approval ratings. The unemployment rate fell to 3.5% in March. More than 236,000 jobs have been added. But there was no political payback for the president.
we. Adults skip job numbers and generally feel bad about the economy. White House aides can list plenty of reasons for pessimism: high inflation, the remnants of the pandemic and political polarization that automatically causes Republicans to believe the economy is faltering under a Democratic president.
Going forward, an emerging challenge for Biden may be to predict that unemployment will get worse this year.
This is the opinion of the Federal Reservewhich expects the unemployment rate to reach 4.5%. and the Congressional Budget Office (5.1%). Even the proposed budget That Biden just put forward models an increase (4.3%) from the current rate. Likewise, many Wall Street analysts operate under the Fed’s tame shorthand for inflation by raising interest rates, which in turn leads to slumping demand and rising unemployment.
Friday’s jobs report showed the economy is cooling down as wage growth slows, but the job market is still running hotter than the overall economy in a way that could fuel uncertainty. Biden is betting that conventional economic wisdom is wrong and that 6% inflation can be beaten while keeping unemployment low.
“We continue to face economic challenges from a position of strength,” Biden said in a statement about the latest jobs report.
a New independent economic analysis It helps explain why the low unemployment rate doesn’t resonate with people: There aren’t enough workers to fill open jobs, which makes the economy run with speed bumps and frictions that make things look worse than they are in the data. The analysis indicates that the economy will run more smoothly with the unemployment rate rising to 4.6%, although that would translate to nearly 2 million fewer people holding jobs.
The labor market is what economists call “inefficiently tight,” a problem the United States also faced during the Vietnam War, the Korean War, and World War II. The present distress is as severe as it was at the end of the Second World War. This misalignment makes businesses and consumers alike feel as if the economy is in trouble, said Pascal Michelat, an economist at Brown University.
“For shopkeepers,” he said, “it means working shorter hours because no workers can be found to fill the extra voids.” “For families, that means more time trying to hire nannies or plumbers or construction workers and less time doing fun things.”
Based on his calculations on job and employment opportunities from A.J 2024 written papers With economist Emmanuel Saez, Mikhaelat estimates that an unemployment rate of 4.6% would make the labor market more efficient. At this rate, the daily transactions that make up the economy will have less friction because the demand for workers will be closer to the supply. Government figures released on Tuesday show employers have 9.9 million job openings, nearly twice the number of unemployed people looking for work.
This seems to be a good problem because it means wages have to be increased. But economic theory suggests that the only way to solve this situation is higher unemployment.
Asked what this dilemma might mean for Biden, Michaelat said: “Economics mixes with politics, as it often does.”
When Republicans criticize Biden, it is often because of the kinds of deficiencies Michelat describes, as well as because of inflation.
Small business owners “tell us that Democrats’ anti-labor policies have made it difficult to stock their shelves, hire workers, and keep their doors open,” said Jason Smith, chairman of the House Ways and Means Committee.
More than two years after the release of Biden’s $1.9 trillion coronavirus relief package, it is frustrating for a White House as many people feel the economy sucks when his record on jobs is unmatched among recent presidencies.
Biden’s unemployment rate is so far better than that of Presidents Ronald Reagan, Bill Clinton, Barack Obama, Jimmy Carter and Gerald Ford, both from Bush. While unemployment was lower for a while under Presidents Lyndon Johnson and Richard Nixon, there was a lower percentage of people in the workforce than it is now.
Biden set out to use COVID-19 aid dollars to get people back to work quickly and prevent the usual “scarring” in recessions that can leave people earning less for the rest of their careers and, in some cases, permanently out of work. It has succeeded in this task because the economy has about 4 million more jobs than the Congressional Budget Office has projected at this point.
A White House official said the policies were designed with the specific goal of bringing jobs back faster than in previous recoveries. After the Great Recession began at the end of 2007 and the economy collapsed, it took more than six years for the total number of jobs in the United States to return to pre-deflationary levels. In the recovery from the pandemic, total jobs rebounded to its previous level in just over two years.
Historically disadvantaged groups benefited from the speed of recovery. The black unemployment rate in March fell to 5%, an all-time low. The black labor force participation rate – which measures the number of people with jobs or looking for work – surpassed the level of whites last month.
The official, who spoke on condition of anonymity to discuss private conversations, said Biden’s goal is to spur a wave of hiring that would lead to strong growth over the long term. If the job recovery continues, some people may give up hope and drop out of the workforce, reducing the economy’s ability to grow for decades to come.
Biden rejected criticism that the amount of COVID relief contributed to inflation, even though research published by the Federal Reserve Bank of New York indicates that federal aid accounted for about a third of the higher inflation from late 2019 to June 2024.
Nick Pinker, director of economic research at Indeed Hiring Lab, said Friday’s jobs report indicates that the unemployment rate is unlikely to rise in the next three months. He said employment continues to outpace demographic gains.
He noted the strength of job growth compared to the Great Recession, but said many people are still adjusting to the realities of high inflation and the consequences of the pandemic.
“There are clear benefits to the speed of this recovery,” Pinker said. “Speed is great because it gets you to your destination, but it can be disconcerting because there’s a bang.”