WASHINGTON ― The recession that many economists predicted hasn’t happened.
Consumer confidence is surging.
The stock market has soared to all-time highs.
And on Friday came a robust jobs report, with the U.S. economy adding 353,000 jobs in January, according to the Labor Department − nearly twice what was projected.
President Joe Biden’s struggle to convince Americans of an improving economy amid stubborn inflation was long considered one of his biggest liabilities as he seeks reelection this fall, likely in a rematch against Republican frontrunner Donald Trump.
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Yet the repeated good news on the economic front − capped by Friday’s blockbuster jobs report − suggests the tide could be turning, potentially making the economy a strength for Biden by the time of the November election.
“The economy is about as good as it gets,” said Mark Zandi, chief economist of Moody’s Analytics, adding that even the one blemish − inflation that is “still stinging” − is becoming less painful. “I think with each passing month, his case will strengthen,” Zandi said of Biden, “and people’s perceptions will align more with his message.”
The economy has long been a weakness for Biden in polls, with surveys showing disapproval among Americans about his handling of it. Part of the reason for that has been a starkly uneven recovery in the aftermath of the pandemic.
Wealthier households have reaped more of the benefits of the economic improvement. Meanwhile, middle-class and low-income Americans have suffered the brunt of the pain from higher prices for groceries and other goods. And high student debt burdens and climbing housing prices have combined to reinforce the economic anxiety for many households.
Former Trump official: Report is a jobs ‘blowout’
But January’s jobs gains shattered economists’ projections that 185,000 jobs were added last month. The unemployment rate held steady at a low 3.7%, marking 24 months of unemployment below 4%, the longest streak since the 1960s. The U.S. economy has now added 14.8 million jobs since Biden took office − a gain of 5.4 million more jobs than before the Covid-19 pandemic.
“America’s economy is the strongest in the world. Today, we saw more proof,” Biden said in a statement.
Even Larry Kudlow, former director of the National Economic Council in the Trump administration, called it “a blowout” jobs report, despite Republicans’ continued criticism on Biden over the economy.
“I know many of my conservative friends are trying to drill holes in this report,” Kudlow said on Fox News. “But you know what, folks? It is what it is. It’s a very strong report. Not every economic stat should be viewed through a political lens.”
The U.S. gross domestic product, the value of all goods and services produced in the U.S., expanded by 2.5% last year, more than any advanced economy in the world last year, according to an International Monetary Fund analysis released this week. The U.S. economy is expected to grow faster than all other nations this year as well.
Meanwhile, the stock market has been on a steady rise for months, with the Dow Jones Industrial Average eclipsing 38,000 for the first time ever. It’s so strong that Trump − who predicted a market collapse if Biden won the 2020 election − now wants credit, telling his supporters this week that the hot stock market is the result of investors predicting a Trump victory in the fall.
White House spokesman Andrew Bates mocked Trump in response, saying “we welcome the wide range of ideologically diverse voices conceding that President Biden is delivering an economy that actually delivers for hardworking families − not just billionaires or executives in multinational corporations.”
Consumers growing more confident about easing inflation
The improving economic trends aren’t entirely new.
For the past year, the White House has sought credit for a robust jobs market and growing economy, dubbing Biden’s economic agenda “Bidenomics.” But Biden has been unable to calm economic anxieties because of primarily one reason: high inflation.
Although inflation has slowed significantly since reaching a 40-year high of 9.1% in June 2022, it has been a winding path downward. Consumer prices edged up to 3.4% in December compared to a year ago, up from 3.1% in November. The cost of services such as rent, car repairs and auto insurance have moved higher.
But there are new signs that Americans are becoming less concerned about inflation.
Consumer sentiment has climbed 29% over the past two months, the largest two-month increase since 1991, according to the University of Michigan’s frequently cited survey of consumers. It’s the result largely of an improved outlook over inflation and personal finances. The consumer confidence index is now 60% higher than the all-time low measured in June 2022 and at its highest level since July 2021.
“It’s rare to see this level of agreement across the population and across different aspects of the economy,” said Joanne Hsu, director of the University of Michigan’s consumer index survey. She said consumers were reserving judgment in the fall whether the inflation slowdown would stick. “Now with so many months of sustained slowdown in inflation, I think consumers are finally starting to feel assured. They are ready to take a breath.”
Moody’s Analytics forecasts a Biden win based on economy
A Quinnipiac University poll this week found Biden leading Trump 50%-44% nationally among registered voters, expanding what was a 1-point Biden lead by the same pollster in December. Importantly, it found Biden leading independent voters who will be crucial in deciding the 2024 election 52%-40%.
A majority of voters, 55%, said they disapprove of Biden’s handling of the economy, compared to 42% who said they approve. Yet it marked a slight improvement from Quinnipiac’s December poll, which found only 39% approved of Biden’s handling of the economy.
“Things are finally beginning to sink in,” Biden, reflecting on the surge in consumer confidence, said during a stop last week in Superior, Wisconsin. “We passed a lot of really good legislation. We knew it was going to take time for it to begin to take hold. But it’s taken hold now and turning the economy around.”
Still, consumer sentiment remains 7% below the historic average, according to the University of Michigan survey, suggesting many Americans still want to see lasting economic improvements before their anxiety eases.
And with the exception of the Quinnipiac poll, Biden still trails Trump in the majority of head-to-head polls and in several key battleground states.
Nevertheless, Moody’s Analytics projected a narrow Biden victory over Trump in its presidential election model released Thursday. The forecast is based on economic conditions of the country that are historically key election indicators − such as gas prices, household income, mortgage rates and consumer confidence − in addition to political factors.
“Biden has an advantage because he has the economy at his back,” Zandi said. “There’s an economic tailwind to his reelection bid. If everything sticks to our script, it will only intensify as we approach the election. The economy is going to continue to perform well. And by Election Day, I think that will resonate more soundly with with voters.”
Reach Joey Garrison on X, formerly Twitter, @joeygarrison.
