Another month, another jobs report, and another day closer to the November elections. Here is the state of play with the economy and labor market four months out from Election Day.
As of Friday, the election is exactly four months away. Economists and political scientists alike have been watching the jobs reports and other economic reports, like those for inflation, closely given the coming presidential clash and President Joe Biden’s poor economic approval ratings.
The economy added 206,000 jobs in June, and the unemployment rate rose a tenth of a percentage point to 4.1%, the Bureau of Labor Statistics reported on Friday. That was about in line with expectations that around 190,000 jobs would be added.
Job growth has been healthy under Biden, with more jobs added every single month of his presidency. But despite that, and the historically low unemployment rate, voters have soured on the economy. That is in large part because of the towering inflation experienced since Biden entered office. Things are much more expensive now than when former President Donald Trump was in office, which has colored perceptions of the broader economy.
And with just four months out, experts say that not much is likely to change in terms of voters’ feel of the economy between now and November.
Mark Hamrick, senior economic analyst at Bankrate, said that inflation touches all households, but lower- and middle-income workers have felt the sting more acutely. He also said that polling indicates Democrats are a bit more tolerant in terms of economic approval than Republicans, who have largely placed the onus on Biden.
“And so, what I would say is that those perceptions are unlikely to change substantially in the coming months,” Hamrick told the Washington Examiner. “Because other than maybe seeing a little bit more relief on prices, we don’t really expect there to be a sea change in the economy. And opinions are probably pretty substantially decided.”
Annual inflation has fallen significantly from its peak of about 9%, according to the consumer price index. It is now running at about 3.3% in May, which is still higher than the Fed’s preferred 2% level.
However, while 3.3% inflation might feel manageable for consumers, that has only been a gauge for the past 12 months. Given hotter inflation in the years before that, cumulative inflation for goods has increased by over 19% just since Biden was sworn in.
Instead of comparing prices to what they were a year ago, many are comparing them to what they remember before Biden entered office, complicating things for the team Biden and often overshadowing the strong jobs market and months of historically low unemployment.
Hamrick noted that the labor market has remained above water this year despite the high interest rates that the Fed has pumped up. He said that current unemployment levels are nearly consistent with levels that would be considered “full employment.”
Also, while the unemployment rate has ticked up in the past couple of months, it is crucial to note that 4.1% is not a bad reading. For quite some time after COVID-19, the economy was supercharged with demand, which caused inflation to explode and the Fed to raise rates.
“Really what we need to have is an economy that is in a state which is sustainable, rather than red hot or too hot to handle,” Hamrick said. “And that’s the way the economy was for a time coming out of the pandemic.
“And so to the extent that the unemployment rate is now at the highest level since November of 2021, that really tells you about how remarkably low the unemployment rate had been for a long stretch, below 4,” he added.
Peter Loge, director of the George Washington University School of Media and Public Affairs, also noted that the even bigger news for Biden was his recent debate performance where he appeared halting, and at times confused. Some Democrats have been floating the notion that he could be replaced on the ticket, so the latest report has gotten even less political capital this month.
“You know, I think the economic story for Biden is one that the campaign wants to tell. Wages are up, the market is up, unemployment is down,” Loge told the Washington Examiner. “But so far, he’s having trouble telling that story, because he’s got to convince the American people he is still up to the task.”
Loge also noted that the average voter doesn’t view the economy through the lens of macroeconomic trends and data. They experience the economy. So what voters notice is that gas prices are higher than they were under Trump or groceries cost more, not what something like the three-month moving average of job gains is (177,000).
“This past week people weren’t thinking about the economy, they were thinking about buying burgers and beer and hotdogs and fireworks — and those cost more now than they did five or 10 years ago,” Loge said, noting that the latest jobs report came a day after the Fourth of July.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Again, inflation has fallen though. But it will likely take even longer for it to finally fall down to the 2% range, Fed Chairman Jerome Powell said this week. Powell said Tuesday that annual inflation might not return to that healthy range until late next year or 2026.
“You know, we don’t see ourselves getting back to 2% inflation this year or next year — well, maybe late next year — but in the year after,” Powell said during a moderated conversation with other central bankers in Portugal. “The main thing is, we’re making real progress.”
