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Inflation overshadows robust employment gains

REHOBOTH BEACH, Del. – President Joe Biden came before television cameras on Friday to celebrate another month of healthy job growth and low unemployment and the fastest pace of hiring in four decades under his oversight.

“The job market,” declared the President, “is at its strongest since just after World War II.”

But, as is so often the case, the topic soon turned to rampant inflation, which has emerged in Americans’ minds as the economic issue that worries most and is a key reason for Biden’s plummeting public approval ratings.

Voters have shown in polls that their attention is much more focused on rising gas and food prices than on the plentiful supply of jobs. Years of post-pandemic recession price hikes — to their highest in four decades — have left many Americans grappling with basic necessities and unhappy with the broader economy.

On Friday, that momentum made Biden pledge to fix the economy to try to bolster public confidence and his flagging poll numbers.

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“There’s no denying that prices, especially gas and food, are real issues,” the president said in Rehoboth Beach, Delaware, where he is spending the weekend. “I understand that families who are struggling probably don’t care why prices have gone up. They just want to bring her down.”

It was a stark example of the changing political and economic landscape that Biden and congressional Democrats face as the midterm elections loom. For decades, when inflation remained tame, job growth and unemployment were the key economic metrics by which voters judged presidents. But now Biden faces a new era in which, for most Americans, chronically high inflation has eclipsed a consistently strong job market.

The shift shows how the seemingly timeless truths of American politics can be reshaped by the lived reality of voters, where old priorities are fading and new fears are emerging.

At just 3.6%, the unemployment rate is near a half-century low as of Friday The government reported that employers had created 390,000 additional jobs in May – about twice as fast as before the pandemic. Businesses posted more than 11 million job vacancies in April, down just slightly from March’s record high.

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Still, Americans are gloomy about the economic outlook and Biden’s record. Two-thirds of Americans disapprove of his handling of the economy, according to a poll by The Associated Press-NORC Center for Public Research conducted in mid-May.

One reason for the discrepancy is that people perceive inflation and job gains in very different ways, Felicia Wong, president of the liberal Roosevelt Institute, said during a webinar this week.

“People attribute better jobs and higher wages to their own individual actions,” said Wong, who served on Biden and Harris’ transition team. “‘I did a good job. I got a raise.’ I don’t think most people think of a strong labor market enabled and driven by political decisions. In contrast, when gas prices go up, when food prices go up, people definitely blame someone else.”

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Higher inflation, fueled in part by supply chain snarls and Russia’s invasion of Ukraine, is ravaging millions of Americans, particularly low-income and black and Hispanic households who spend a disproportionate chunk of their income on gas, rent and groceries .

Wages have risen, but not as fast as prices, eroding the purchasing power of most Americans. As a result, more people are saying they are struggling to pay their weekly bills Latest Census Bureau Household Pulse Survey.

Even with a solid labor market, 16 million more households said last year they were finding it “somewhat” or “very” difficult to pay for their expenses, the survey found in early May. More and more households say they can get by with credit cards, spend their savings or borrow money from others.

The financial strain has increased, although the survey showed a 78% drop in households relying on unemployment benefits – a sign that job growth is not enough to offset the problems caused by inflation.

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Inflation fears began to build more than a year ago, according to polls by Republican polling firm Echelon Insights among the likely electorate. Biden and White House advisers initially downplayed the risk that their $1.9 trillion coronavirus relief package could trigger higher inflation. Instead, they focused on the strong job growth that followed government spending.

Patrick Ruffini, a partner at Echelon Insights, said high inflation has led more voters in favor of cutting government spending and increasing oil and gas production — a policy favored by Republican lawmakers. Even if inflation falls below current levels, Biden would likely still face the same type of hostile environment that his predecessors endured in 2014 and 2018. At the same time, his previous claims that inflation was slowing have damaged his credibility.

“For a long time, the Biden administration didn’t even seem to acknowledge the problem,” Ruffini said.

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The President has repeatedly called inflation the “top priority”. However, he also said that the responsibility for the reduction rests primarily with the Federal Reserve. That message might work for economists, Ruffini suggested, but voters want “political leadership.”

It’s very different from what Biden and his economics team expected when they took office in January 2021. At that time, vaccines were not yet introduced. And the main concern among Biden and business officials like Treasury Secretary Janet Yellen was that the economy would undergo another slow jobs recovery, much like it did after the Great Recession of 2008. It took more than six years from the start of this downturn to regain all the jobs lost .

“We want to achieve what economists call ‘full employment,'” Biden said at a Cleveland Community College in May 2021. “Instead of workers competing with each other for scarce jobs, we want workers to compete with each other to attract jobs.”

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The administration has achieved this goal. After 22 million jobs were lost in early 2020 alone, the peak of the pandemic, the economy has recovered to 800,000. It took two years – instead of six – for employment to substantially recover.

Biden’s pandemic relief package contributed to that result, economists say. It has given a big boost to demand through a round of $1,400 stimulus checks, improved unemployment benefits and $300 monthly child tax credit payments for most parents.

But that level of spending has also fueled inflation, as even some economists who have served in Democratic administrations — including former Treasury Secretary Lawrence Summers and President Barack Obama’s top aide Jason Furman — have warned against it.

Consumer prices shot up 8.3% in April year-on-year, slightly lower than March but still close to its worst in 40 years. Gas prices have skyrocketed 44% in the past year and are still rising. Groceries are 11% more expensive.

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Ben Harris, the assistant treasury secretary for economic policy, said in the Roosevelt Institute webinar on Thursday that it was “frustrating” for the Biden administration because without its fiscal stimulus package, the alternative likely would have been far worse: slower job growth and more economic pain for Familys.

“We can’t observe the counterfactual, but the counterfactual is really ugly,” Harris said.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, transcribed or redistributed without permission.

https://www.local10.com/news/politics/2022/06/03/bidens-challenge-inflation-overshadows-robust-job-gains/ Inflation overshadows robust employment gains

Sarah Y. Kim

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