“We are on the right track,” Biden said. “Our plan is working. And we are not going to give up now. We will continue to move forward. I am extremely optimistic.”
May’s jobs report showed the complexity of restarting the economy after a pandemic shutdown and mixed signals that could result in an unprecedented increase in government spending through the economy. Biden can congratulate his administration on 559,000 jobs and a 5.8% unemployment rate, yet his $1.9 trillion relief package was followed by fewer recruits than many economists expected.
Biden’s challenge is to convince Americans that his administration’s relief efforts have done well enough to sustain rapid growth rather than create inflation and imbalances, which are at least $3 trillion in roads, clean energy, children. could jeopardize public support for their plans to invest. and school.
The report suggested that not enough people are looking for work, a potential problem for a president who is hoping his rescue package will bring the country back to full employment by 2022. While Biden saw the jobs data as an absolute speed-ahead argument for his agenda, many economists were urging some degree of caution to see if more Americans were looking for jobs after the huge losses caused by the coronavirus pandemic. Will start searching.
Republicans, for their part, found ways to turn the jobs report into an argument against Biden’s plans to finance more government programs through tax increases on the wealthy and corporations. Their concern is that generous unemployment benefits will keep people from accepting jobs and that government aid – much of it still to come – will fuel inflation.
Texas Representative Kevin Brady, the top Republican on the House Ways and Means Committee, said Biden should put as much COVID-19 relief money as possible into infrastructure.
“If we want to help families build their lives and rebuild the American economy for the long term, it’s time to end emergency spending and endless government scrutiny,” Brady told Fox Business.
The big red flag in the jobs report was that the labor force participation rate dropped to 61.6%. Despite government spending, it is essentially unchanged from last summer and was down from 63.3% 14 months ago before the coronavirus. Low participation rates mean that a healthy economy is not encouraging enough people to find work.
For some economists, it is proof that Biden’s $1.9 trillion relief package was excessive. Government spending has so far generated more demand for workers and goods than the economy, possibly justifying some Republican criticism.
Mark Goldwyn, senior vice president of a responsible committee, said, “We have a general understanding of what’s going on at this point: We’re not going to be able to create jobs fast enough relative to what’s demanding in the economy. ” federal budget.
Goldwyn and other economists said they believe Biden’s aid package helped the economy, although similar results could have been achieved with less money. There’s also the possibility that the relief package’s expanded unemployment benefits boosted consumer spending and that ensuing state and local government aid put workers on the payroll — all of which could help boost jobs totals.
Harvard University professor Jason Furman, former chief economist of the Obama White House, said it was surprising that participation rates fell in a month when vaccination was advancing, COVID-19 infections were declining, job opportunities were increasing and Wages were increasing.
Because demand for workers exceeds their current supply, a glimmer of hope for Biden is a sharp jump in average hourly earnings. This is an obvious advantage for working Americans that can be sold on the campaign trail, but the risk of wages rising too quickly is the level of inflation that can stifle growth.
Furman urged patience in a recent paper, arguing that the demand for workers will most likely outpace the supply of those seeking jobs.
In a paper for Peterson with Wilson Powell III, he wrote, “There will be more price inflation in the interim, but over time this will be offset by an economy that returns to something that is also out of its pre-pandemic path.” could be better.” International Institute of Economics.
Biden acknowledged the difficulty of reviving the economy after shutdowns tied to the pandemic, noting that it was not as simple as flicking a light switch. One of the major problems is supply constraints for computer chips, used cars and an array of raw materials that can lead to higher prices. In the short term, supply constraints are driving up prices and may become costly to fund infrastructure projects.
Brian Deez, director of the White House National Economic Council, said the administration plans to issue a review next week on how to make supply chains more resilient. But some of the current mismatches are short-lived and will need to be resolved through market forces.
“On a lot of these issues,” Deez said, “there is no immediate short-term, magic bullet fix.”