President Joe Biden confronts the 2022 midterm elections determined to fix what economists refer to as a “supply” problem — a shortage of job seekers and goods to meet the country’s demands.
• Economists refer to this as a “supply” problem – the country does not have enough job seekers or goods to meet its demands. As a result of the misalignment, Biden has been forced to defend his policies against Republican critics while highlighting his economic achievements.
• Rather than focusing on the demand side of the economy, the White House is focusing its efforts on the supply side. The alternate would be to cut public spending to reduce demand, which might have a detrimental effect on people’s wellbeing and ability to spend and invest. It unveiled a slew of initiatives aimed at opening up supply networks.
• According to the latest US Department of Labor jobs data, the US is still 3.6 million jobs short of pre-pandemic levels. According to an expert, only 39% of working-age Americans are fully vaccinated and have received a booster injection. This contrasts to 36% who require a booster shot and 25% who have never been vaccinated.
Biden’s economic headache on workers & goods
Anyway, this is a political problem.
The discrepancy has overshadowed Biden’s first year’s strong growth and 3.9% unemployment rate, the level of performance that often helps the president and congressional Democrats charm voters in the midterm elections.
Biden has touted his economic accomplishments while fending off Republican charges that his policies have fueled inflation.
“This is the sort of recovery I promised and hoped for the American people,” President Biden said in remarks Friday.
“My priority is maintaining a strong and long-lasting recovery, notwithstanding Republican obstructionism. Because, as you all know, even while employment and family incomes have recovered, families continue to feel the strain of rising prices and costs.”
Americans’ economic economy had deteriorated, although the economy is objectively more robust than it was in 2020, just before Biden assumed office.
The University of Michigan’s barometer of consumer mood is 12.5% lower than a year ago, despite vaccinations and 6.4 million new jobs gained in the last year.
Consumers’ attention is focused on car shortages, bath towel shortages, and even cereal shortages.
Employers cannot fill the 10.6 million jobs advertised, as the December employment report revealed an increase of just 199,000 jobs.
Prices for virtually everything are increasing — with economists predicting a 7.1 percent yearly increase in next Wednesday’s inflation report.
Kevin McCarthy, the Republican leader in the House, brushed aside the economy’s apparent positives and blamed the government for any inadequacies.
“President Biden has been in office for nearly a year. Our economy is still missing millions of pre-pandemic jobs, consumers are enduring unprecedented inflation, and employers continue to struggle with a persistent labor shortage,” the California legislator said in a statement.
As a policy and political difficulty, White House officials said they’re attempting to enhance the supply of workers and goods this year while the pandemic and supply chain issues persist.
They must accomplish this while retaining consumer and business demand, two economic cornerstones unintended consequences of last year’s $1.9 trillion coronavirus relief package.
Although the administration anticipates a decline in inflation, it is unwilling to wait indefinitely.
The administration views supply as the only feasible option, as cutting government spending to lower demand would jeopardize people’s wellbeing and ability to spend and invest.
Supply chain quagmires
“In this economy, demand is high, but supply is constrained, “Jared Bernstein, a member of President Biden’s Council of Economic Advisers, stated.
“There are two approaches to redressing the disparity. First, you may manipulate the demand side and ultimately impoverish people, preventing them from pursuing their goals. Alternatively, you may attempt to increase supply — which is what we are doing.”
Biden unveiled a slew of initiatives aimed at unclogging supply lines, allowing container ships to dock more quickly and big-rig trucks to get on the road with fully loaded trailers.
The measures include modernizing ports with funds from the $1 trillion infrastructure package and presidential actions to raise the number of commercial truck drivers and ambitions to increase domestic chip manufacture.
According to the White House, the supply chain is already being addressed.
It noted an increase in retail stocks and a 39% drop in shipping containers held at ports for nine days or longer since November.
Biden has also stated that his proposed investments in child care, families, and health care — all of which have been delayed in the Senate — will alleviate supply limitations by allowing more parents to work.
Yet his justifications for roughly $2 trillion in new spending and tax increases have failed to impress West Virginia Sen. Joe Manchin, the deciding Democratic vote, who fears inflation and wants to require families receiving the child tax credit to work.
The persistent pandemic threat is also at the heart of the workforce shortage.
The original wave in 2020, followed by the delta and, most recently, the omicron versions, have made it more difficult for people to return to work or train for new jobs. This has resulted in a labor shortage and exacerbated supply chain and inflationary difficulties.
“The virus continues to be the economy’s primary concern today,” said Aaron Sojourner, a University of Minnesota economist.
“Every week, millions of employees miss work because of COVID symptoms or caring for someone who has symptoms, and the unvaccinated are 2.4 times more likely to miss work.”
According to Sojourner, only 39% of working-age Americans are fully vaccinated and have received a booster dose.
This leaves 36% in need of a booster shot and 25% who have never been completely vaccinated.
Heather Boushey, a member of the White House Council of Economic Advisers, stated that the pandemic resulted in widespread unemployment and disruptions to families and companies.
However, she noted that supply chain challenges have been more difficult to handle because they are global and involve specific long-standing issues unrelated to the coronavirus.
“This is a global issue, not simply domestic,” Boushey explained.
According to Tyler Goodspeed, a former Trump administration economics adviser who is now a Hoover Institution fellow at Stanford University, Friday’s employment statistics demonstrated how difficult it might be to increase the number of job seekers.
The research was released ahead of the anticipated impact of the coronavirus omicron strain, which has resulted in school and company closures.
Nonetheless, it revealed that the labor force participation rate has remained relatively stable, indicating that the supply of available workers is constrained, even though the US remains 3.6 million jobs short of pre-pandemic levels.
Additionally, since the pandemic, there has been a decline in corporate investment, making it more challenging to expand supply in the economy, Goodspeed said.
“I have difficulty visualizing how the supply will keep up with demand in 2022,” he remarked.