This week in Bidenomics: Almost everything is great

If jobs and wages told you everything you need to know about the American economy, we’d be in a golden age.

employers added 431,000 new jobs in March, a muscular pace of engagement that shows no signs of slowing down. Job creation is averaging 562,000 new jobs per month so far this year and 565,000 new jobs per month since President Biden took office in 2021. At this rate, the economy will exceed previous employment levels to the pandemic for the summer. The unemployment rate fell from 3.8% to 3.6% and is also on track to meet or exceed the Trump-era low in any month.

Wages are growing 5.6% annually, well above pre-pandemic levels, with the biggest gains among the lowest-paid workers. Jobs and wages are booming in industries crushed by the COVID pandemic that erupted two years ago, including restaurants and travel. Employers are still reporting a near-record 11.3 million job openings, suggesting the job market will remain active for the foreseeable future.

A serious threat to the Biden presidency

So what is the problem? As everyone knows, it is inflation. Prices are increasing at an annual rate of 7.9%, and the recent increase in energy prices caused by Russia’s invasion of Ukraine could increase further. In the consumer psyche, inflation trumps an active labor market, apparently: consumer confidence has sunk during the last 12 months and is in recessive levels. This comes as COVID is receding and the many pesky public health restrictions put in place over the past two years are finally lifting.

Biden knows that inflation is a serious threat to his presidency, with the first test in November’s midterm elections. If inflation continues to hover around 8% in the fall, when voters are making up their minds, it will likely shift control of both houses of Congress from Biden’s Democrats to Republicans. The question is whether Biden can do anything about it.

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Maybe a little. Biden’s decision on March 31 to release a million barrels per day from the US oil stockpile, from May to October, pushed oil prices a bit lower and could keep the pressure down. Biden has also been asking big state-owned oil producers like Saudi Arabia to produce more, with no luck so far. But foreign policy experts say the Saudis could change their mind if Biden offered something in return, such as more assistance in Saudi Arabia’s war with Yemen. Even flattering self-centered Saudi Crown Prince Mohammed bin Salman might help.

U.S. President Joe Biden comments on the March jobs report during a speech in the State Dining Room of the White House in Washington, U.S., April 1, 2022. REUTERS/Kevin Lamarque

U.S. President Joe Biden comments on the March jobs report during a speech in the State Dining Room of the White House in Washington, U.S., April 1, 2022. REUTERS/Kevin Lamarque

It’s also possible that some of the forces that have been driving prices up could break Biden’s path for months to come. The Russian invasion of Ukraine, for example, appears to have reached a plateau, well below the maximum damage it could have done to the world economy. Energy experts, for example, have warned of worst-case oil prices of $150 or even $200 a barrel; US prices peaked at $124 in early March and are now hovering around $100. The stock market’s healthy gains in March also reflect diminishing fears of a global recession or some other economic crisis emanating from Ukraine.

Automakers boosted employment in March, suggesting shortages of semiconductors and other components are easing, which should boost vehicle supply and push prices down a bit. general motors highlighted the improved availability of semiconductors as a key factor leading to increased production.

High prices may also be causing something economists call “demand destruction,” which sounds bad but could actually help control inflation. The basic idea is that when something becomes more expensive, people buy less, which reduces demand and drives prices down again. Which can it will already be happening with gasoline, as drivers combine trips or travel a little less, to save fuel. Car buyers also pay much more attention to fuel economy when gas prices are high, which can shift demand from large, expensive vehicles to smaller, cheaper ones. That was the last time gas prices hit $4 a gallon, in 2008, and it’s probably happening now.

A potential recession indicator glowed yellow in late March, when short-term interest rates exceeded longer-term rates. This so-called “yield curve inversion” often indicates that a recession is coming, since long-term rates typically fall during a recession. The same inverted yield curve before the recessions that started in 2001, 2007 and 2020.

The economists think this inversion could be an anomaly, However. The strong job market itself should keep the economy going by fattening wallets and fueling spending.

β€œThe strength of the labor market provides a solid cushion against the recession,” Ameriprise Chief Economist Russell Price said in a statement after the April 1 jobs report.

Also, the inversion of the yield curve can signal a recession months or years before it actually happens. the inverted yield curve in early 2006, for example, but a recession didn’t start until 22 months later. If that were the case now, Biden would not have to worry about a recession until early 2024, when he is a full election cycle away. He has far more pressing concerns.

Rick Newman is the author of four books, including “Bouncers: How Winners Go From Setbacks To Success.Follow him on Twitter: @rickjnewman. You also can send confidential tips.

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