WASHINGTON (AP) — For President Joe Biden, the past few days have raised hopes that the U.S. economy can avoid a recession as the 2024 election approaches.
As high inflation has masked a strong job market, most American adults have pessimistic feelings about Biden’s economic leadership. It has long been economic orthodoxy that the Federal Reserve’s efforts to curb inflation will increase unemployment and plunge the country into recession.
But for the president and some economists, the April jobs report released Friday contradicted that theory with its 3.4% unemployment rate and 253,000 job gains.
The strong jobs report came after Wednesday’s Fed meeting, which suggested the U.S. central bank may pause its rate hikes, the primary tool for reducing inflation from its high of 5% to 2%. Talks are also beginning about the need to raise the debt ceiling — with Biden calling congressional leaders to the White House for a meeting on Tuesday, hoping to finally get a commitment to avoid a default.
For a president seeking a second term, Biden struck an optimistic tone as he met with aides Friday as he pushed GOP lawmakers for a clean increase in the debt cap.
„We’re going in the right direction, I think we’re making real progress,” he said of the overall economy, telling Republican lawmakers not to „undo all this progress” with the debt ceiling freeze.
The economy may still falter. Many economists are predicting a recession this year, given the wild cards of the Ukraine war, global tensions and the debt ceiling fight. But steady job gains have suggested to some policymakers and economists that it is possible to contain inflation without layoffs.
Federal Reserve Chairman Jerome Powell told reporters on Wednesday that current trends run counter to history.
„It’s unlikely that unemployment is down, not up,” Powell said. „Well, that’s what we’ve seen. There’s no promise of it, but it seems to me that it’s possible that we’ll have a continued cooling of the labor market without a big increase in unemployment.
Heidi Schierholz, president of the Economic Policy Institute, a liberal think tank, said there were no signs of a recession at the moment, and that if one did break out, it would be due to the central bank’s overreach.
„We’re in the middle of a soft landing right now — possibly slowing wage growth, slowing inflation,” he said.
But that doesn’t mean voters are happy with the economy. Inflation continues to vex Biden as he begins the process of launching his re-election campaign. GOP lawmakers have used higher prices as a political maneuver since the pandemic, with House Speaker Kevin McCarthy, R-Calif., pushing for spending cuts as part of a debt ceiling deal to reduce inflation. The debt ceiling refers to spending obligations that the United States has already made and not future spending.
Even as Biden trumpets a firmer job market, Fed officials may interpret the hiring as evidence that they need to raise rates higher and that will cause more pain for the economy and democratic governance.
„The starting point is that inflation is stubbornly high and politically troublesome,” said Douglas Holtz-Eakin, former director of the Congressional Budget Office and president of the center-right American Action Forum. „The Fed wants to lower it.” The data doesn’t seem to behave. The Fed could very well hike again in June – and that would make financial markets lose their collective minds.”
There is also the possibility that lawmakers will fail to avoid default. Or, there could be so much drama in getting a debt ceiling deal that the economy weakens this summer. The Treasury Department has predicted that its accounting maneuvers to keep the government running will be exhausted by early June, by which time a deal should be struck.
The White House released estimates showing that exceeding the debt ceiling — even if a deal comes together — could cost the economy 200,000 jobs.
Not all economists believe the U.S. economy has escaped the gravity of the recession.
Many believe it could happen later this year, shaping the 2024 campaign. The jobs report will be more of a temporary hope than a lasting victory for Biden. The historical pattern can reassert itself as the campaign season begins to heat up.
„The strong performance of the labor market dampens expectations of an imminent recession,” said Kathy Postjanczyk, chief economist at Nationwide Insurance. „Our view is that a recession is on the horizon that will emerge in the second half of the year, but the current solid job gains and buoyancy in wage growth suggest that it could start later in the year.
„Oddany rozwiązywacz problemów. Przyjazny hipsterom praktykant bekonu. Miłośnik kawy. Nieuleczalny introwertyk. Student.