Biden's Re-election Threatens Job Market Slowdown

President Biden and the Democrats find themselves in economic purgatory with less than a year until the crucial election in 2024.

The U.S. economy is slowing after years of rapid growth following the pandemic, curbing inflation on the way down. But the slow march toward a balanced economy brings little political benefit to Biden and his party.

Biden’s approval ratings have fallen to record lows as Americans feel the pinch of high interest rates and stagnant inflation.

While declining job growth and wage growth may help combat inflation, they also leave the government with fewer and fewer opportunities to sell Americans on its handling of the economy.

Julia Pollak, chief economist at ZipRecruiter, said the labor market slowdown “partly explains why job seekers and new hires are feeling more stressed than they have in over a year.”

“Increasing financial burdens coupled with falling employee debt are taking their toll. “The decline in real disposable income last month suggests that consumer spending could cool further in the coming months, putting even more downward pressure on the labor market.”

Record job gains, but record low approval

President Biden makes his way to Marine One on the South Lawn of the White House in Washington, DC on Friday, November 3, 2023 (Greg Nash)

Biden and Democratic lawmakers have struggled to translate record job growth into positive economic surveys.

Since Biden took office in January 2021, the US has created around 14 million jobs – far more than any of his predecessors. Millions of those jobs were simply the result of a recovery that was already underway before Biden’s election, but the president has still made the speed of the comeback a centerpiece of his re-election campaign.

“Today’s report shows that Bidenomics will grow the economy from the center out and from the bottom up – not from the top down,” the White House said in a statement Friday.

Biden and Democrats are eager to recognize the resilience of the U.S. labor market, which many economists had predicted would now lose jobs.

The US added 150,000 new jobs in October as the unemployment rate rose

With 150,000 new jobs added last month and an unemployment rate of 3.9 percent, experts say the U.S. is still creating far more than enough new jobs to keep the economy out of recession.

“The economy only needs to add 75,000 jobs per month – compared to 200,000 a decade ago – to stabilize employment in the face of demographic changes,” wrote Joseph Brusuelas, chief economist at U.S. accounting and tax firm RSM, in an analysis dated Friday.

He added that October’s jobs numbers were “consistent with full employment” and were “worthy of celebration,” especially after years of high inflation.

However, Biden’s support was not as strong.

According to a Gallup poll released last week, only 37 percent of Americans support Biden becoming president, the lowest level of his presidency. Biden’s support among Democrats also fell by 11 percentage points to a new record low of 75 percent.

The president’s approval among independents fell 4 percentage points to 35 percent, and just 5 percent of Republicans approve of Biden.

Recent polls on Biden’s handling of the economy and consumer sentiment have also fallen sharply, largely in line with a rise in interest rates and credit card balances.

Inflation and interest rate hikes remain top priority

A line of 2022 Santa Fe SUVs sit in front of a Hyundai dealership in Littleton, Colorado, on Sunday, September 12, 2021. (AP Photo/David Zalubowski, File)

Biden and leading Democrats have largely blamed the media and Republicans for pushing Americans’ gloomy views on the economy.

In remarks last month after a stunning job gain in September, Biden chided reporters — “not the happiest people in the world,” he said — for overly fixating on inflation and recession fears.

“I think the people who got jobs have a better sense of the economy,” Biden said in October.

Car payments are a burden on owners given the high rates

Millions of Americans who lost their jobs during the recession got them back under Biden, much faster than many economists expected. Strong demand for workers also helped tens of millions of Americans get higher wages and new jobs with better pay, flexibility and career opportunities.

Callie Cox, US investment analyst at eToro, also called the record number of strikes a sign of “the power that employees have at this moment.”

After a strike since September 14, the United Autoworkers (UAW) reached tentative agreements this week with Ford, General Motors (GM) and Stellantis on new contracts that would provide for a 25 percent increase in workers’ wages.

The UAW also won back key concessions, including cost-of-living adjustments and faster progress on top wages, that it had abandoned after the Great Recession.

“We are in the midst of a labor market strengthening movement that has been a long time coming, and it is just another reminder of how solid the economy is (even though this may not be visible in the economic data),” Cox wrote .

But as the job market slows to pre-pandemic strength, Americans are still grappling with both inflation and interest rates reaching their highest levels in decades.

Americans are struggling to pay off their debts as the economy strains

The annual inflation rate peaked at 9.1 percent in June 2022, before reaching 3.7 percent in September, according to the Consumer Price Index (CPI).

According to Nick Bunker, head of economic research at Indeed, the slowdown in the job market could also hit hardest among Americans who are least able to absorb a setback.

“The increase in unemployment is concentrated among workers who recently lost their jobs, and the recovery rate of unemployed workers has fallen,” Bunker explained.

“Perhaps this increase is just a sign that the extremely tight labor market of recent years is easing. But a sustained upward trend would be worrying.”

“The Fed has the key”

Federal Reserve Chairman Jerome H. Powell speaks during a news conference at the Federal Reserve in Washington, Wednesday, Nov. 1, 2023. (AP Photo/Susan Walsh)

Rising inflation pushed the Federal Reserve into the fastest rate-hiking cycle in its history and pushed borrowing costs to their highest level since the 2007-2008 recession.

The Fed on Wednesday refrained from raising interest rates for the second straight day, citing the impact of higher interest rates on businesses and consumers. Experts doubt the bank will raise borrowing costs again after October’s weak jobs report.

“The good news is that this slowdown is not due to economic fundamentals, but rather due to careful orchestration by the Fed. “If it turns out that the Fed and bond markets have gone too far, the key to reversal lies in the Fed’s hands,” Pollak said.

Pollak said that companies “have a lot of open positions, they want to hire new employees and they want to expand.” But high interest rates are slowing them down. As interest rates begin to fall next year, expect pent-up demand for labor, transportation, construction materials and a variety of other inputs to be released.”