As the White House gradually moves into 2024 campaign mode, President Biden is in Chicago to deliver a speech on his economic record. The address on Wednesday comes as the rate of inflation has fallen by half in the past year, and new G.D.P. figures, to be released later this week, are expected to confirm that the U.S. economy has defied economists’ predictions of a recession. It also comes on the tails of an announcement from the Conference Board, an international economics-research organization, that its indicator of economic confidence rose to the highest level in a year and a half in June—another sign of the economy’s resilience.
On Monday, two of Biden’s senior political advisers, Anita Dunn and Mike Donilon, distributed a memo with the subject line “Bidenomics Is Turning the Page on Failed Trickle-Down Policies and Transforming Our Economy—and It Is Strongly Supported by the Vast Majority of Americans.” The end is a reference to polls indicating that most Americans support many of Biden’s legislative achievements, including the bipartisan infrastructure bill, the CHIPS and Science Act, and elements of the Inflation Reduction Act, which allowed Medicare to negotiate drug prices and provided subsidies for clean energy. Still, despite these individual poll findings, and the better-than-expected economic news, the President’s over-all economic-approval rating is still hovering around forty per cent, according to the Real Clear Politics poll average. As I wrote last week, continued concerns about inflation and high prices seem to be overshadowing everything else in voters’ minds.
But setting aside the politics of all this, which isn’t easy, Biden has a stronger economic argument to make than many people realize. In headline terms, his case can be summed up in three words: jobs, investment, and fairness. At a broad level, the Administration’s policies have helped the U.S economy rebound from the COVID-19-induced slump more strongly than many economists expected, while, simultaneously, starting to tackle some deep challenges that had long been neglected. By the nature of things, it’s too early to say whether these efforts to shift the economy’s historical trajectory will succeed, but some of the early signs are encouraging.
The jobs record is central. When Biden took office, in January, 2021, the pandemic recovery was well under way: a hundred and forty-three million Americans were working, and the unemployment rate was 6.3 per cent. Last month, 156.1 million Americans were employed, and the jobless rate was just 3.7 per cent. Precisely how much of the job growth we’ve seen during the past two and a half years can be attributed to the $1.9 trillion stimulus that the Biden Administration signed in the March, 2021, American Rescue Plan can be debated, but the legislation undoubtedly played a significant role in supporting demand and hiring.
“There was still a huge jobs hole as of January, 2021,” Skanda Amarnath, the executive director of Employ America, a Washington-based group that advocates for full employment, said. “We could have tried to fill that up very quickly, or we could have tried to build a post-financial-crisis recovery, which was ten to twelve years. We decided to put it on overdrive, and we ended up with a very complete employment recovery on a lot of different dimensions. I think that is still underappreciated.” Last month, 80.7 per cent of prime-age workers—those twenty-five to fifty-four—were employed. That’s higher than before the pandemic started. In fact, you need to go back to 2001, and the bursting of the dot-com bubble, to find a higher figure.
The number of people working full-time is at record levels, and the Labor Department’s broadest measure of unemployment, which includes people who are working part-time for economic reasons and people who are out of work but haven’t looked for employment recently, has fallen to levels not seen since before the pandemic. About the only group whose employment rate hasn’t truly rebounded from the plunge during the pandemic is the cohort of people over seventy. But, as Amarnath told me, that’s not necessarily a bad thing: some of the elderly, having stopped working during the pandemic, may have simply decided to stay retired.
In the Build Back Better economic plan that Biden laid out during his 2020 Presidential campaign, he promised to boost investment in American manufacturing and bring back jobs that had been offshored. After entering the White House, he didn’t get his entire economic agenda through Congress. But, taken together, the new spending, tax credits, and investment subsidies that were contained in the infrastructure bill, the CHIPS Act, and the Inflation Reduction Act amount to an ambitious new industrial policy, which aspires to strengthen American high-tech manufacturing, make the green-energy transition a reality, and create well-paying jobs. Earlier this year, I argued that Biden’s industrial initiative would ultimately be seen as his most significant policy contribution.
Although this policy has run into skepticism in some quarters, there is evidence that it’s already having a big impact. In April, the Financial Times counted “more than 75 large-scale manufacturing announcements,” containing pledges to spend more than two hundred billion dollars combined, since the passage of the CHIPs and Inflation Reduction acts. Foreign companies like Taiwan Semiconductor Manufacturing Company and LG Energy Solution, a South Korean producer of batteries for electric vehicles, have moved to secure their place in the vast U.S. market, as have big domestic corporations, like Intel and General Motors. These manufacturing announcements are continuing, and the surge in investment and construction has become visible in aggregate economic statistics. “Inflation-adjusted construction spending in the manufacturing industry has absolutely skyrocketed since June 2022, from $90 billion to $189 billion,” the economics writer Noah Smith pointed out earlier this month, on his Substack. “Factory construction spending more than doubled in one year, after being essentially constant for decades. And it perfectly lines up with the passage of the CHIPS Act in July 2022 and the Inflation Reduction Act in August 2022.”
Bidenomics, according to Dunn and Donilon’s memo, is “rooted in the simple idea that we need to grow the economy from the middle out and the bottom up—not the top down.” Over all, because price increases have outpaced wage growth during the past couple of years, the Biden team faces an obvious challenge in convincing ordinary Americans that things are getting better for them. That being said, many workers are beginning to see their wages rising faster than prices. “A year ago, there was a very large gap between inflation and wage growth,” the White House Council of Economic Advisers pointed out, in a blog post that compared the Consumer Price Index to wages for two large subgroups of the workforce: all private-sector workers, and nonsupervisory production workers. “More recently, that gap has largely disappeared, and since last June, real wages are up about 1 percent for both wage series.”
If these trends continue between now and November, 2024, the public might start to pay more attention to the positive developments in the economy, which have also recently included record-low rates of unemployment for Black workers, and near-record-low rates for Hispanic workers, in addition to a bump in wages for low-paid workers, who had previously seen decades of wage stagnation or declines. This phenomenon began during the pandemic, when many employers were struggling to find workers, and it has persisted. Between 2019 and 2022, the inflation-adjusted wages of workers in the tenth percentile of the wage distribution increased by nine per cent, according to a study published earlier this year by Elise Gould, an economist at the Economic Policy Institute, in Washington, D.C. When I spoke to Gould on Tuesday, she said that, based on wage data from industries such as leisure and hospitality, which employ a lot of low-wage workers, it appears that this trend has kept up into 2023. “Low-wage workers have had a bit more leverage, and that is reflected in the wage data,” Gould said. “They are doing better than before.”
The gains that low-wage workers are enjoying are a testament to the enduring strength of the labor market. Gould pointed out, however, that there is no guarantee they will continue, especially if job growth fades as the Federal Reserve continues to raise interest rates. Congress could have taken actions to lock in the gains, she said, such as increasing the federal minimum wage, which hasn’t been raised since 2009. That hasn’t happened because it would require sixty votes in the Senate, and Republican opposition remains firm. Biden’s pitch is that, despite the political constraints under which he’s been operating, he has managed to push through other significant policy changes that stand to benefit the economy in both the short run and the long run. It’s a reasonable argument. The challenge is selling it to voters who remain focussed on inflation despite the fact that the over-all rate is down, and that the prices of some consumer staples, such as eggs and butter, have fallen back sharply this year. ♦
