HO CHI MINH CITY –
For President Joe Biden, the past few days have raised hopes that the U.S. economy could land a soft landing — possibly avoiding a recession as the 2024 election approaches.
Most U.S. adults have a feeling of optimism about Biden’s economic leadership, as high inflation has overshadowed a burgeoning job market. The economic mainstream has long held that the Federal Reserve’s efforts to push back against inflation will lead to a rise in unemployment and the country into a recession.
But for the president and some economists, Friday’s April jobs report challenged that theory with an unemployment rate of 3.4% and 253,000 jobs created.
The strong jobs report came after Wednesday’s Fed meeting that suggested the US central bank could pause rate hikes, the main tool to cut inflation from still high 5% to lows. almost 2%. Negotiations are also starting over the need to lift the debt limit – with Biden inviting congressional leaders to the White House for a meeting on Tuesday in hopes of eventually reaching a pledge to avoid default.
For a president seeking a second term, Biden exuded confidence Friday when he met with aides even as he urged GOP lawmakers to raise the debt ceiling.
“We’re on the right track and I think we’re making real progress,” he said of the economy as a whole, telling Republican lawmakers not to “cancel all this progress” with the suspension of the debt limit.
The economy could still stumble. Some economists are forecasting a recession this year, considering the perils of the war in Ukraine, global tensions and the battle to curb debt. Still, steady job numbers have suggested to some policymakers and economists that inflation can be contained without laying off staff.
Fed Chairman Jerome Powell told reporters on Wednesday that current trends are going against history.
“There can’t be job opportunities falling as much as they have been without the unemployment rate rising,” Powell said. “Well, that’s what we’ve seen. There’s no promise in this, but to me, it looks like we’ll continue to soften the labor market without increasing unemployment. “
Heidi Shierholz, president of the Economic Policy Institute, a liberal think tank, said there are currently no signs of a recession and if a recession breaks out it will be due to excessive Fed intervention. .
“We’re in the middle of a soft landing right now – we’ve shown that we can reduce wage growth, lower inflation,” she said.
But that doesn’t mean voters are satisfied with the economy. Inflation remains a persistent irritant as Biden has begun the process of kicking off his re-election campaign. GOP lawmakers have used high post-pandemic prices as political leverage, with House Speaker Kevin McCarthy, R-Calif., insisting on spending cuts as part of a debt-limiting deal aimed at reduce inflation. Debt limits refer to spending obligations that the United States has incurred and does not have to spend in the future.
Just as Biden trumpets a decent job market, Fed officials may see the hiring as evidence that they need higher interest rates and that that could do more damage to the economy and the economy. Democratic Party government.
“The starting point is that inflation remains high and politically troubling,” said Douglas Holtz-Eakin, former director of the Congressional Budget Office and president of the center-right American Action Forum. “The Fed wants to bring it down. The data doesn’t seem to be working properly. The Fed is very likely to raise rates again in June – and that will cause financial markets to lose their collective sense.”
It’s also possible that lawmakers failed to prevent default. Or, there could be too much drama surrounding the debt-restriction deal that leaves the economy weaker this summer. The Treasury Department has forecast that its accounting procedures to keep the government running could dry up by early June, at which point a deal is needed.
The White House has released estimates showing the brink of war exceeding the debt limit – even if a deal is reached – could still cost the economy 200,000 jobs.
Not all economists believe that the US economy has escaped the pull of the recession.
Many believe it could happen later this year, possibly shaping the 2024 campaign. The jobs report may be just a temporary reassurance for Biden, not a lasting victory. The historical pattern can reassert itself as soon as the campaign season kicks in.
“Strong labor market activity dampens expectations of an immediate recession,” said Kathy Bostjancic, chief economist at insurance company Nationwide. “Our view remains that a recession is still ahead, in the second half of the year, but steady job numbers and wage growth suggest it could start towards the end of the year. this year.”