Rehoboth Beach, Delaware – President Joe Biden came before television cameras on Friday to celebrate another month of healthy job growth and low unemployment and the fastest pace of hiring in four decades under his leadership.
“The labor market,” the president said, “is the strongest it’s been since just after World War II.”
Yet, as is often the case, the subject quickly turned to runaway inflation which has become the economic issue most on the minds of Americans and one of the main reasons for the decline in credit ratings. public approval of Biden.
Voters have made it clear in the polls that their attention is much more focused on soaring gas and food prices than on the plentiful availability of jobs. A year-long acceleration in prices following the pandemic recession — to the highest levels in four decades — has left many Americans struggling with the cost of necessities and dissatisfied with the overall economy.
That momentum on Friday left Biden vowing to fix the economy in an attempt to bolster public confidence and his declining polling numbers.
“There’s no denying that prices, especially around gas and food, are real issues,” the president said in Rehoboth Beach, Delaware, where he spends the weekend. “I understand that struggling families probably don’t care why prices have gone up. They just want to knock them down.
It was a stark illustration of the changing political and economic landscape that Biden and congressional Democrats face as the midterm elections approach. For decades, as inflation remained subdued, job growth and unemployment tended to be the main economic indicators by which voters judged presidents. But now Biden faces a new era in which, for most Americans, chronically high inflation has eclipsed a still strong job market.
The change shows how the seemingly timeless truths of American politics can be reshaped by the lived realities of voters in which old priorities fade and new fears emerge.
At just 3.6%, the jobless rate is near a half-century low, and on Friday the government announced that employers had created an additional 390,000 jobs in May, around double the pace of before the pandemic. Companies advertised more than 11 million job openings in April, down slightly from March’s record high.
Yet Americans are gloomy about Biden’s economic outlook and record. Two-thirds of Americans disapprove of his handling of the economy, according to an Associated Press-NORC Center for Public Research poll conducted in mid-May.
One reason for the disconnect is that people view inflation and job gains very differently, Felicia Wong, president of the liberal Roosevelt Institute, said in a webinar this week.
“People attribute better jobs and higher wages to their own individualized actions,” said Wong, who served on the Biden-Harris transition team. “’I did a good job. I got a raise. I don’t think most people think of a strong labor market enabled by and guided by policy choices. In contrast, people definitely blame someone else when gas prices go up, when food prices go up.
Rising inflation, due in part to supply chain issues and Russia’s invasion of Ukraine, is causing hardship for millions of Americans, especially low-income households and black and Hispanic households, who spend a disproportionate share of their income on gasoline, rent and food.
Wages rose, but not as fast as prices, eroding the purchasing power of most Americans. As a result, more people report struggling to pay their weekly bills, according to the Census Bureau’s most recent household survey.
Even with a strong labor market, an additional 16 million households over the past year said they found it “somewhat” or “very” difficult to pay their expenses, the survey found in early May. More and more households report getting by with credit cards, spending their savings or borrowing from others.
Financial pressure has increased even as the survey showed a 78% drop in households relying on unemployment benefits – a sign that job growth has been insufficient to offset the problems caused by inflation.
Fear of inflation began to build more than a year ago, according to polls of the likely electorate by Republican polling firm Echelon Insights. Biden and White House aides initially downplayed the risk that their $1.9 trillion coronavirus relief package could trigger higher inflation. Instead, they focused on the strong job growth that followed government spending.
Echelon Insights partner Patrick Ruffini said high inflation has prompted more voters to favor government spending cuts and increased oil and gas production – policies favored by Republican lawmakers. Even if inflation falls from current levels, Biden would still face the same kind of hostile medium-term environment that his predecessors endured in 2014 and 2018. At the same time, his past assertions that inflation would decline damaged his credibility.
“For a long time, the Biden administration didn’t even seem to acknowledge the problem,” Ruffini said.
The president has repeatedly called inflation a “top priority.” Yet he also said the responsibility for reducing it lies first and foremost with the Federal Reserve. That message may work with economists, Ruffini suggested, but voters want to see “political leadership.”
That’s very different from what Biden and his economics team expected when they took office in January 2021. At the time, vaccines weren’t yet rolled out. And the main concern for Biden and economic officials, such as Treasury Secretary Janet Yellen, was that the economy would go through another slow jobs recovery, similar to what happened after the Great Recession of 2008. It has taken more than six years since the start of this downturn to recover all the lost jobs.
“We want to achieve something economists call ‘full employment,'” Biden said at a Cleveland community college in May 2021. “Instead of workers competing for scarce jobs, we want employees to compete to attract work.”
The administration has achieved this goal. After the loss of 22 million jobs at the start of 2020, at the height of the pandemic, the economy recovered almost 800,000. It took two years – instead of six – for employment to essentially rebound.
Biden’s pandemic relief package contributed to that outcome, economists say. He has given a big boost to demand with a series of $1,400 stimulus checks, improved unemployment benefits and child tax credit payments of $300 a month for most parents.
But that level of spending has also fueled inflation, as even some economists who have served in Democratic administrations — including former Treasury Secretary Lawrence Summers and President Barack Obama’s top adviser Jason Furman — have warned that this could happen.
Consumer prices jumped 8.3% in April from a year earlier, down slightly from March but still near the worst in 40 years. Gasoline prices have climbed 44% over the past year and continue to rise. Groceries are 11% more expensive.
Ben Harris, the assistant secretary of the Treasury for economic policy, said during the Roosevelt Institute webinar on Thursday that it was “frustrating” for the Biden administration because the alternative, without their financial aid package, likely would have been far worse: slower job growth and more economic pain for families.
“We can’t observe the counterfactual, but the counterfactual is really ugly,” Harris said.