Biden’s Economic Challenge: Finding Workers and Assets
President Joe Biden enters midterm election year 2022 determined to solve what economists call a ‘supply’ problem – there are not enough job seekers or goods seekers to meet to the needs of the country.
It is also a political problem. The mismatch masked the strong growth and 3.9% unemployment rate achieved in Biden’s first year, the kind of performance that would typically help the President and Congressional Democrats woo voters mid-term . This left Biden trying to showcase his economic achievements while trying to ward off Republican criticism that his policies fueled inflation.
“This is the kind of recovery I promised and hoped for for the American people,” the president said in remarks on Friday. “My goal is to keep this recovery strong and lasting, despite Republican obstructionism. Because, you know, I know that even though jobs and family incomes have picked up, families are still feeling the pinch in prices and costs. “
Pessimism has overtaken Americans’ views on the economy, even though the economy is objectively better than it was in 2020 just before Biden took office. University of Michigan consumer confidence index is 12.5% lower than a year ago, despite vaccination and 6.4 million jobs created in the past 12 month.
Shoppers are focusing on shortages of cars, towels and even breakfast cereals. Employers cannot fill the 10.6 million jobs they advertise because Friday’s jobs report showed only 199,000 jobs were created in December. Prices for almost everything are up – forecasters expect a 7.1% annual increase in next Wednesday’s inflation report.
Republican House Leader Kevin McCarthy sidestepped the clear positives in the economy and blamed the administration for any shortfall.
“President Biden has been in power for almost a year, and our economy still lacks millions of jobs before the pandemic, consumers face inflationary pressure that has not been felt for nearly 40 years and Employers continue to struggle with a persistent labor shortage, ”the California lawmaker said in a statement.
As a policy and a political challenge, White House officials say they are looking at how to increase the supply of workers and goods this year as pandemic and supply chain issues persist. They must do so while preserving consumer and business demand, two pillars of economic strength that are byproducts of last year’s $ 1.9 trillion coronavirus relief program. The administration expects inflation to slow, but it doesn’t want to sit idly by for that to happen.
The administration sees the supply factor as the only viable solution, as the alternative would be to cut government spending to reduce demand in a way that could adversely affect people’s well-being and their ability to spend and invest.
“We have a very high demand in this economy, and we have limited the supply,” said Jared Bernstein, member of the White House Council of Economic Advisers. “There are two ways to fix this imbalance. You can hit the demand and basically make people poorer, so they don’t have the resources to pursue what they want. Or, you can try to ‘expand the offer – that’s what we do. ”
Biden has announced a host of initiatives to unclog supply chains, so container ships can dock faster and large trucks can hit the road faster with full trailers. Efforts include updating ports with $ 1,000 billion infrastructure law money, as well as executive actions to increase the number of commercial truckers and plans to increase domestic production of computer chips.
The White House says it is already fixing the supply chain. It released a note that noted an increase in store inventories and a 39% drop since November in sea containers waiting at ports for nine days or more.
Biden also said his proposed investments in child care, families and health care – which is stuck in the Senate – would ease supply constraints by making it easier for more parents to work. Yet his arguments for the nearly $ 2 trillion in spending and tax increases have failed to sway West Virginia Senator Joe Manchin, the decisive Democratic vote, who fears inflation and wants to demand that families who receive the child tax credit have jobs.
At the heart of the labor shortage is also the persistent threat of the pandemic. The initial wave in 2020, followed by the delta and now omicron variants, made it more difficult to return to work or to train for new occupations. This created a shortage of workers and worsened supply chain problems and inflation.
“The virus remains the biggest problem in the economy today,” said Aaron Sojourner, economist at the University of Minnesota. “Millions of employees miss work each week because they are showing symptoms of COVID or caring for someone with symptoms, and those who are not vaccinated are 2.4 times more likely to have symptoms of COVID. ‘take time off from work. “
Sojourner estimated that only 39% of working-age Americans are fully immunized and have received a booster. That leaves 36% who need a booster and 25% who have never been fully immunized.
Heather Boushey, also a member of the White House Council of Economic Advisers, said the pandemic has caused massive unemployment and upheaval for families and businesses. But she said supply chain challenges have been more difficult due to their global nature and the fact that they involve long-standing challenges that are distinct from the coronavirus.
“It’s not just in the United States – it’s a global problem,” Boushey said.
Friday’s jobs report showed how difficult it could be to increase the number of workers looking for jobs, said Tyler Goodspeed, an economic adviser in the Trump administration and now a Hoover member. Institution of Stanford University.
The report came out ahead of the likely impact of the omicron variant of the coronavirus, which has resulted in the closure of schools and some businesses. Yet it showed that the percentage of people in the labor force has not increased substantially, a sign that the supply of available workers is tight even though the United States still lacks 3.6 million jobs per year. compared to pre-pandemic levels. There has also been a shortfall in business investment since the pandemic, making it more difficult to increase supply in the economy, Goodspeed said.
“It’s hard for me to see how supply keeps pace with demand in 2022,” he said.