Labor pains
One of the more puzzling aspects of the U.S. economy is that employers have been hiring almost nonstop since President Biden took office, but analysts say there are no signs that this trend will reverse anytime soon. He says he hasn't been seen.
The paradox is that the jobs boom doesn't guarantee Biden will remain in the White House beyond November, completely undermining the adage that it's the economy that wins elections, idiots.
Despite many predictions that the United States would fall into recession, employers have added jobs for 39 straight months. It also faces many of the challenges that hold back many of its U.S. peers, including high inflation and interest rates. The war between Ukraine and Gaza caused energy prices to soar. and shipping disruptions at the Panama Canal, the Red Sea, and now the Port of Baltimore.
March was another big hit on the employment front. Employers added 303,000 jobs in the latest data released Friday, well above analysts' expectations. This brings the total number of employees over the past 12 months to more than 2.8 million, and economists expect this upward trend to continue. “We still think there's room for growth” looking into next year, Jeremy Schwartz, senior U.S. economist at Nomura, told Dealbook.
It's uncertain whether Biden will be able to use that in his campaign against Donald Trump. The White House hailed the latest numbers as a “milestone in America's recovery” and held them up as evidence that Biden's flagship policies, the Control of Inflation Act and the CHIPS Act, are growing the economy.
But a heated labor market could easily exacerbate Biden's two major vulnerabilities. That's inflation, where high wages fuel a surge in spending that drives up the prices of everything from gasoline to concert tickets. and In order to counteract these price increases, interest rates will remain high for a long period of time. Yesterday's report raised expectations among Wall Street analysts that the Fed would be in no hurry to cut borrowing costs.
(By the market close yesterday, traders were pushing back on expectations that the Fed's first rate cut would be in July rather than June.)
Biden's vote count has remained close to that of many first-term presidents. Voters say they are dissatisfied with his handling of economic policy, even though he is a world-beater by many metrics. “When it comes to the economy, mood and facts are at odds, and mood is winning,” the Wall Street Journal's Greg Yip wrote this week.
Some skeptics are beginning to change their minds. Jefferies economist Thomas Simmons, who had predicted the U.S. would slip into a recession this year, wrote in a note to investors that yesterday's jobs report “casts doubt on the bearish narrative.” Mohamed El-Erian, an economist and advisor to Allianz, experienced a similar turnaround. He told Bloomberg TV that the latest jobs report “confirms the exceptionalism of the U.S. economy.”
There's still a lot of bad economic news. Americans (both young and old) are worried about saving for retirement. They are racking up credit card debt and their savings are dwindling.
However, the labor market remains bright. Wages are rising and labor force participation is rising, with 469,000 people joining the workforce last month and the labor force participation rate rising from 62.5 percent to 62.7 percent. Schwartz said the post-pandemic economic recovery has brought about broad improvements across racial and income disparities.
Nomura focuses on a specific metric that measures the likelihood of being in office: the Misery Index. It is a simple calculation that adds the inflation rate to the unemployment rate. Presidents with a high misery index tend to fail at reelection.
Biden's distress ratings have remained relatively high throughout his presidency. However, this figure has fallen in line with inflation and should be lowered further in the latest employment figures.
The question is whether Biden's misery index will drop enough to fall into the range of Ronald Reagan and Barack Obama, who won again in their first terms on the back of a slow economic recovery, or will it drop significantly enough to fall into the range of Ronald Reagan and Barack Obama, who won again in their first terms on the back of a slow economic recovery? The question is whether he will get closer to President H.W. Bush. Game 2 in 1992?
In other words, will voters give Biden credit or blame him for inflation?
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Our focus: “Showdown: US vs. China”
The United States and China have worked to stabilize relations in recent months, but the underlying tensions between the world's two largest economies are not going away anytime soon. Treasury Secretary Janet Yellen criticized the Chinese government in recent days on a visit to China, denouncing “coercive actions against American companies” and warning that state-backed manufacturers are distorting global markets.
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“Faceoff: U.S. vs. China,” an eight-part podcast starting Tuesday, seeks to explain this relationship and why the stakes are so high. The series will be hosted by Jane Perles, former New York Times Beijing bureau chief and current Harvard Kennedy School student, and will feature prominent historian Lana Mitter. Perles told DealBook that the goal is to provide listeners with a “rational approach” to understanding one of America's biggest challenges.
Perles and Mitter discuss everything from Apple's remarkable rise in China and the future of Taiwan to Chinese espionage and the personal relationship between Biden and Xi Jinping, and discuss everything from diplomats, espionage, technology and military experts. , and even interviews Yo-Yo Ma.