Rampant inflation overshadows job gains
Biden’s message of progress competes with voters’ fears ahead of mid-terms
REHOBOTH BEACH, Delaware – President Joe Biden came before the television cameras Friday to celebrate yet another month of healthy job growth and low unemployment and the fastest pace of hiring in four decades under his watch.
“The job market,” the president declared, “is the strongest it’s been since just after World War II.”
Yet just as it often does, the subject soon turned to the rampant inflation that has emerged as the economic issue most on Americans’ minds and a leading reason for Biden’s sunken public approval ratings.
Voters have made clear in surveys that their attention is focused much more on soaring gasoline and food prices than on the plentiful availability of jobs. A yearlong acceleration of prices in the aftermath of the pandemic recession – to the highest levels in four decades – has left many Americans struggling with the cost of necessities and dissatisfied with the overall economy.
On Friday, that dynamic left Biden promising to fix the economy to try to shore up public confidence and his flagging poll numbers.
“There’s no denying prices, particularly around gasoline and food, are real problems,” the president said in Rehoboth Beach, Delaware, where he was spending the weekend. “I understand that families who are struggling probably don’t care why prices rose. They just want to bring them down.”
It was a stark illustration of the shifting political and economic landscape Biden and Democrats in Congress face as midterm elections loom. For decades, as inflation remained tame, job growth and unemployment tended to be the top 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 become reshaped by the lived-in realities of voters in which old priorities fade and new fears emerge.
At just 3.6%, the unemployment rate is near a half-century low, and on Friday the government reported that employers added 390,000 more jobs in May – roughly double the pre-pandemic pace. Businesses advertised more than 11 million open jobs in April, down only slightly from a record high in March.
Yet 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 from The Associated Press-NORC Center for Public Research conducted in mid-May.
One reason for the disconnect 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 individualized actions,” said Wong, who served on the Biden-Harris transition team. “‘I did a good job. I got a raise.’ I don’t think that most people think about a strong labor market enabled by and driven by policy choices. In contrast, people definitely blame someone else when gas prices go up, when food prices go up.”
Higher inflation, partly stemming from supply chain snarls and Russia’s invasion of Ukraine, is causing hardships for millions of Americans, particularly lower-income and Black and Hispanic households, which spend a disproportionate share of their income on gas, rent and food.
Wages have been rising, but not as fast as prices, thereby eroding most Americans’ spending power. As a result, more people say they’re struggling to pay their weekly bills, according to the Census Bureau’s most recent Household Pulse Survey.
Even with a solid job market, 16 million more households over the past year said they found it “somewhat” or “very” difficult to pay their expenses, the survey found in early May. More households say they’re getting by with credit cards, spending down their savings or borrowing from others.
The financial strain has grown even as the survey showed a 78% decline in households relying on unemployment benefits – a sign that job growth has been insufficient to offset the problems caused by inflation.
Fear of inflation began to build more than a year ago, according to surveys of the likely electorate by the Republican polling firm Echelon Insights. Biden and White House aides initially downplayed the risk that their $1.9 trillion coronavirus relief package could spark higher inflation.
They focused instead on the muscular job growth that followed the government spending.
Patrick Ruffini, a partner at Echelon Insights, said that high inflation has caused more voters to favor reductions in government spending and greater oil and gas production – policies favored by Republican lawmakers. Even if inflation falls from current levels, Biden would still likely face the same kind of hostile midterm environment his predecessors endured in 2014 and 2018. At the same time, his past claims that inflation would fade have hurt his credibility.
“For a long time, the Biden administration was not even seeming to acknowledge the problem,” Ruffini said.
The president has repeatedly called inflation a “top priority.” Yet he’s also said that the responsibility for reducing it rests first and foremost with the Federal Reserve.
That messaging may work with economists, Ruffini suggested, but voters want to see “political leadership.”
It’s very different from what Biden and his economic team expected when they took office in 2021. Vaccines weren’t yet being rolled out. And the main worry among Biden and economic officials was that the economy would grind through another slow jobs recovery, similar to what occurred after the 2008 Great Recession. It took more than six years from the start of that downturn to recover all the lost jobs.
“We want to get something economists call ‘full employment,’ ” Biden said at a Cleveland community college in May 2021. “Instead of workers competing with each other for jobs that are scarce, we want employees to compete with each other to attract work.”
The administration achieved that goal. After 22 million jobs were shed in just early 2020, the height of the pandemic, the economy has recovered all but 800,000. It took two years for employment to essentially rebound.
Biden’s pandemic relief package contributed to that outcome, economists say. It sharply boosted demand through a round of $1,400 stimulus checks, enhanced unemployment benefits and $300-a-month child tax credit payments for most parents.
But that level of spending 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 adviser, Jason Furman – warned that it might.
Consumer prices jumped 8.3% in April compared with a year earlier, down slightly from March but still near the worst in 40 years. Gas prices have skyrocketed 44% in the past year and are still rising. Groceries are 11% more expensive.
Ben Harris, assistant treasury secretary for economic policy, said Thursday that it is “frustrating” for the Biden administration because the alternative, without the financial aid package, would likely have been much worse.