President Joe Biden continues to see good economic news and low public approval ratings. The unemployment rate fell to 3.5% in March. More than 236,000 jobs were added. But there has been hardly any political benefit for the president.
But the Federal Reserve expects the unemployment rate to reach 4.5% and the Congressional Budget Office (5.1%). Even the budget that Biden just presented contains an increase (4.3%) from the current rate. Many Wall Street analysts are operating under the shorthand that the Federal Reserve controls inflation by raising interest rates, which in turn causes demand to plummet and unemployment to rise.
Friday’s jobs report showed the economy is cooling as wage growth slows, but the job market is still running much hotter than the broader economy. Biden’s bet is that conventional economic wisdom is wrong and that 6% inflation can be beaten by keeping unemployment low.
“We continue to face economic challenges from a position of strength,” Biden said in a statement on the latest jobs report.
A new independent economic analysis helps show why the low unemployment rate still hasn’t resonated with people: There aren’t enough workers to fill vacant jobs, leaving the economy operating with headwinds and friction that make things seem worse. from it that is.
The analysis suggests that the economy would do much better with unemployment above 4.6%, although that could translate into almost 2 million fewer people with jobs.
The labor market today 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 tightness today is as severe as it was at the end of World War II. This mismatch makes both businesses and consumers feel like the economy is stagnant, said Pascal Michaillat, an economist at Brown University.
“For the merchants, it means operating fewer hours because it is not possible to find workers to fill the overtime slots,” he said. “For households, it means more time trying to hire nannies, plumbers or construction workers and less time doing nice things.”
Several economists estimate that an unemployment rate of 4.6% would make the labor market efficient. At that rate, the daily transactions that shape an economy would have less friction because the demand for workers would be closer to the supply. Government figures released on Tuesday show that employers have 9.9 million job openings, nearly double the number of unemployed job seekers.
This sounds like a good problem because it implies that wages should increase. But economic theory suggests that the only way to resolve this situation is for unemployment to rise.
When Republicans criticize Biden, it’s often because of the kind of scarcity and because of inflation.
House Ways and Means Committee Chairman Jason Smith, R-Missouri, said small business owners “are telling us that Democrats’ anti-labor policies have made it harder to stock their shelves, hire workers and keep your doors open.
More than two years after Biden’s $1.9 trillion coronavirus relief package was signed into law, it’s a frustration for the White House that so many people feel the economy is dire when their jobs record is unrivaled among presidencies. modern.
Biden’s unemployment rate so far is better than Presidents Ronald Reagan, Bill Clinton, Barack Obama, Jimmy Carter, Gerald Ford and both Bushes. While unemployment was lower during a period under Presidents Lyndon Johnson and Richard Nixon, a smaller proportion of people were in the labor force compared to now.
AP/Axios/OnCuba.
