Yahoo Finance This week in Bidenomics: Please stop hiring
Would President Biden be better off if companies stopped hiring people?
It might sound like a preposterous conceit, but then again, it’s also true you can have too much of a good thing.
We’ve certainly had a lot of a good thing. The latest jobs report showed that employers created 272,000 new jobs in May, far more than economists expected (as usual). Since Biden took office, employment has grown by 15.6 million jobs, more than any other US president in history.
The hiring slowdown forecasters keep anticipating still isn’t happening. Job creation in 2024 is averaging 248,000 jobs per month, basically the same as the 251,000 new jobs created each month in 2023. Since the latest number exceeds the 2024 average, it suggests the labor market is strengthening, not slackening.
In a normal world this would all be great for an incumbent president facing reelection in five months. Except the Biden economy is like Opposite Day. Great economic news does Biden no favors and voters seem stuck in a downbeat vibe no matter how strong the job market is.
As Yahoo Finance’s Ben Werschkul points out, voters seem to care only about prices and inflation, which is why Biden’s approval rating has been stuck near a dismal 40% for two years, even as the Great American Jobs Machine operates on three shifts.
Strong job growth actually contributes to inflation, which is the catch for Biden. More workers earning more money means demand for goods and services is strong, which either pushes prices up or keeps them elevated. The latest report shows real income, adjusted for inflation, rose 4.1% during the last 12 months, which is good for workers but fuels spending and, therefore, inflation.
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Overall, inflation has moderated from 9% in June 2022 to 3.4% today. That’s a tolerable inflation rate, but as many consumers know, a lot of prices have gone up by more than incomes, and they’ve stayed up. A slowing rate of inflation isn’t bringing prices back to the levels of two or three years ago. It’s just halting price hikes at new, higher plateaus.
Voter polls can be mystifying, but what Americans seem to be saying is the one thing that would make them feel better about Biden and the economy would be declining prices for staples such as food, rent, and transportation. People have a pretty good idea of what a hamburger or milk cost when things were “normal,” whatever that means to them, and when it’s more than that, something’s wrong.
Biden is getting one break: Oil and gasoline prices are dropping, with gas prices now averaging $3.47 per gallon, slightly lower than a year ago. But gas prices jump around, and they could just as easily be rocketing higher by the fall voting season.
The Federal Reserve has jacked up interest rates to get inflation down. The way that usually works is the higher cost of borrowing cuts into economic growth, hiring slows, people spend less, and the weaker demand for goods and services brings down prices.
It’s working, sort of, given that the inflation rate has dropped sharply. The anomaly is that job growth remains so strong two years after the Fed started hiking. GDP growth is holding up too, with the economy growing a solid 1.3% in the first quarter. S&P Global forecasts 2.1% growth for the second quarter and a solid performance for the year, with no recession.
The most bullish reelection scenario for Biden would be a drop in prices that people actually notice. Aside from gasoline, it’s starting to seem unlikely he’ll get that. It hasn’t happened yet, and the strong job market means there are low odds demand will slack off anytime soon.
Biden could obviously have worse problems than a roaring labor market. If there were a recession, with mass layoffs and a soaring unemployment rate, inflation would no longer be a problem but voters would suddenly become panicked about jobs.
Most people would agree that it’s better to have a job, a paycheck, and uncomfortably high prices than to have no job or paycheck but lower prices. Voters don’t think in those terms, however, so Biden will have to deal with a hot labor market and all the unintended consequences.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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