The economy is doing pretty well. So why doesn’t it feel that way? And why isn’t the Biden administration selling it that way?
Let’s start with the good news, coming from the jobs report released Friday.
U.S. employers added 531,000 jobs on net in October, significantly higher than each of the previous two months.
Those months’ (initially very disappointing) figures have just been revised upward, too. Job gains in October were widespread, with growth across leisure and hospitality, professional and business services, manufacturing, and transportation and warehousing. The impact of the COVID-19 delta variant seems to be fading.
We still have a jobs deficit relative to the level of employment when the pandemic recession began, but we’re digging out of it.
The unemployment rate, which comes from a different survey, has ticked down again, to 4.6%. That’s higher than when the recession began (3.5% in February 2020) but still relatively low by historical standards. During the mid-2000s boom years, right before the housing bust, the lowest the unemployment rate hit was 4.4%.
Meanwhile, Americans’ perceptions of the job market are stellar. Gallup recently found 74% of Americans say now is a good time to find a quality job. That’s the highest share since it began asking the question 20 years ago.
Other economic indicators also look quite good. Nominal wage growth (not adjusted for inflation) is high, up 4.9% from a year ago. Overall economic output (gross domestic product) is above its pre-pandemic level. Various measures of the stock market are around all-time highs.
Former president Donald Trump would have trumpeted numbers like these — regardless of whether he was actually responsible for them. (As I’ve written many times, sitting presidents always gets too much credit or blame for economic conditions, relative to the limited economic influence they have.)
So why did that same Gallup poll (among other surveys) find that overall economic confidence is sliding? Maybe it has something to do with the current president’s positive-but-not-quite-gushing approach.
“I would humbly suggest this is a significant improvement from when I took office, and a sign that we’re on the right track,” President Joe Biden said Friday about the strong jobs report.
Why isn’t the Biden administration shouting these numbers from the rooftops, as Trump surely would?
Well, first there’s that little elephant in the room called inflation.
Price pressures have persisted for much longer than most economists had predicted. That’s a consequence of persistent labor shortages here and abroad, and other delta-related supply-chain disruptions. It’s also due to unusually strong demand for consumer goods, driven by big transfers from the federal government to U.S. households; stockpiled savings; and the relative risk of buying services such as travel or restaurant dining right now.
People are trying to buy even more stuff than they did pre-pandemic, but the pipeline that stuff must travel through is unusually fragile. That leads to price hikes and shortages.
Inflation is, obviously, painful for businesses, consumers and workers. Especially when it outruns workers’ (nominal) gains in compensation, as has been the case recently. As of September, workers’ compensation was below its pre-pandemic level once adjusted for inflation.
Many Biden staffers and allies are also somewhat scarred from past experience. Both President Barack Obama and 2016 Democratic presidential nominee Hillary Clinton were sometimes accused of being too upbeat about economic conditions, of emphasizing how far the economy had come rather than how much further it had to go.
Given that many working-class Americans were struggling — and feeling left behind by the economic recovery — messages of optimism and progress sometimes came off as tone-deaf or disconnected.
Similarly, telling Americans who face higher grocery and gas bills today that inflation is merely “transitory” can unintentionally register as dismissive. There’s been a fair amount of infighting on the left about how to talk about inflation — whether to de-emphasize it in favor of other talking points, to say it’s worth the trade-off of having a hotter job market, or to bat away voters’ concerns as in bad-faith or as ill-informed. This quandary was on display Thursday when the Twitterverse and other media commentary erupted over a CNN segment featuring a large family talking about milk price increases.
My own view is inflation is real, it’s painful, and it’s unhelpful — both economically and politically — to pretend otherwise. A better strategy than snarking or denying the economic pain (as Trump might have done) is to present a plausible plan for addressing it.
That seems to be what Biden is attempting. While highlighting some encouraging hiring trends, he acknowledged Friday that “there’s a lot more to be done” and cited the need to “tackle the costs that American families are facing.” He took credit for economic progress (which his pro-vaccination agenda, above all else, has helped with). But he also said that more work, including on inflation, remains.
The Biden agenda will generate that progress, he argued. As long as pricing pressures largely outside his control continue, though, the public still may not buy what he’s selling.