Inflation is a major issue for the Biden administration, as job growth hit new highs in 2021 and wages for many low-wage workers rose.
The White House’s political problem is that voters’ perceptions of the economy continue to be unfavorable, even though job vacancies are hitting record highs.
• President Joe Biden lauded the December employment data released by the US Department of Labor as a “historic day.” In 2021, job growth reached record levels, while earnings for many low-wage employees rose.
• Voters’ perceptions of the economy remain pessimistic, despite near-record levels of job vacancies. The facts favored him, as did the stock market, around 20% higher than during Biden’s predecessor’s tenure.
• Job listings for every major occupational group have increased significantly since the recession.
• This is amid record job growth and near-record vacancy levels last year, polling results support the findings, indicating that Americans are more concerned about inflation over unemployment.
• One factor is that conservative media outlets attribute the inflation surge to President Joe Biden. Another is those supply-chain dynamics worldwide primarily responsible for rising prices and the high cost of oil.
Biden fights back, leveraging the US Department of Labor’s data.
Following a dreadful second half of 2021, President Joe Biden returned to the fray last week. On Thursday, he honored the anniversary of the Capitol Hill riot last January by laying the blame entirely at the feet of “the former President of the United States.” On Friday, Biden returned to the stage to applaud the Labor Department’s December employment data, which appeared to be dismal at first glance.
Wall Street experts forecasted a four-hundred thousand increase in payrolls; the actual amount was 199,900. “I believe today is a watershed moment in our economic recovery,” Biden remarked. “Today, the national unemployment rate went below 4%, to 3.9 percent—the biggest one-year decline in the history of the United States. And we’ve added 6.4 million new jobs since January last year… that’s the most jobs added by any President in any calendar year in history.”
Biden’s case was not about rhetoric. A year ago, the unemployment rate was 6.7 percent, and Federal Reserve Chair Jerome Powell described the economic outlook as “very unclear.” Congress passed the American Rescue Plan, a $1.9 trillion stimulus package, at Biden’s urging last March.
The plan gave households, corporations, and state and local governments financial assistance. The unemployment rate has fallen below 4%, and Powell and his Fed colleagues are poised to raise interest rates because the economy is approaching “maximum employment,” and inflation has risen significantly.
While the inflation rise poses a serious political issue for the White House—the Consumer Price Index increased by 6.8% in the twelve months to November—it is only one element of the economic narrative. For the past year, Biden and the Democrats have done a poor job of stressing the other aspect of their record. In terms of jobs and income, the recovery from the economic collapse associated with the first wave of covid-19 has been considerably more swift than most economists anticipated. For instance, the impartial Congressional Budget Office forecasted in February that the unemployment rate would not fall below 4% until the first quarter of 2026—four years from now.
Additionally, the most recent employment report was stronger than expected. The Labor Department revised its October and November employment gains figures upward. Although the December payrolls estimate, which is based on a monthly survey of employers, fell short of Wall Street projections, the accompanying monthly survey of households, which makes up the other half of the monthly report, revealed that employment increased by 651,000.
The figures from the two surveys are not directly comparable due to various technical factors. However, the Labor Department also publishes an “adjusted” household survey employment figure comparable to the payroll employment data. It increased by three hundred and one thousand in December, closer to the rate projected by economists.
Biden also underlined in his Friday remarks that the labor force participation rate had increased dramatically last year. Workers, particularly low-wage workers, have seen significant benefits. “Women and men working in frontline jobs—in restaurants, hotels, travel, and tourism, as desk clerks, line cooks, wait staff, and bellmen—all saw their pay increase to an all-time high,” he said.
“This year, their salary increased about sixteen percent, well ahead of inflation, which remains a problem.” However, the facts support Biden in this case. And they were also on his side when, without naming the prior President, Biden observed, “The stock market—the previous guy’s yardstick for everything—is roughly 20% higher than when my predecessor was here.”
Voter disconnect dilemma
The White House’s political dilemma is a significant discrepancy between economists’ generally optimistic views of the economy and voter assessments, which are significantly more pessimistic. Although the polling data on this point is extensive, a few current examples are to cite. According to a recent Economist/YouGov survey, 24% of respondents rated the economy as “Good” or “Excellent,” while 68% rated it as “Fair” or “Poor.” Sixty percent of respondents in a CNBC/Change Research poll expressed disapproval of Biden’s handling of the economy.
Even more startling: 58% disapproved of his management of the job situation. This is despite last year’s record job growth and near-record numbers of job vacancies. According to research by Nick Bunker and Ann Elizabeth Konkel, two economists at the data portal Indeed, there are currently more job advertisements for every major occupational group than before the pandemic outbreak. “Employees are resigning to pursue better-paying jobs. It is not the Great Resignation; it is the Great Upgrade,” Bharat Ramamurti, the White House National Economic Council’s deputy director, wrote on Twitter.
Then how is the voter disconnect to be explained? The conventional wisdom is that many Americans process almost all economic news via the lens of inflation, which is currently outpacing pay growth for many workers who do not work in the frontline areas highlighted by Biden.
Polling results corroborate this conclusion. For example, the Economist/YouGov poll questioned respondents whether unemployment or inflation was the most pressing issue confronting the United States. Only 11% of respondents stated unemployment, 39% said “Both equal,” and 43% indicated inflation.
Spiraling inflation-a potent political issue
Rising inflation, particularly in the form of rising gas and food prices, is undoubtedly a decisive political issue because it is obvious and impacts practically everyone. Americans have grown accustomed to low inflation rates. (Before the pandemic, the last time inflation surpassed 6% was in 1990, during the run-up to the Gulf War.)
Another point worth noting is that Fox and other conservative media groups blame Biden for the inflation increase, even though it is a worldwide problem caused mainly by variables over which he has little control, most notably global supply-chain bottlenecks and the high price of crude oil. Three-eighths of respondents to a CNBC/Change Research poll cited Biden as the primary driver of rising prices—above the pandemic and corporations. Seventy-five percent of Trump voters placed the greatest blame on Biden.
With the Labor Department slated to reveal the December inflation rate on Wednesday, the President could face additional political difficulties. At this point, winning over hardcore Trump fans may be futile. Still, the White House and other Democratic Party leaders might better convey their economic case to independents, moderate Republicans who moved over in 2020, and Democrats who find themselves in the doldrums after 2021. Biden’s cheery words on Friday were a start, but he still has a lot of work.