President Joe Biden wasted little time in crowing about stronger-than-expected job creation numbers.
At a Feb. 3 event at the White House, Biden touted the creation of 12 million jobs during his presidency, the lowest unemployment rate since 1969, increases in real wages for the past six months, and 2.9 percent growth in gross domestic product during 2022’s fourth quarter. “I would argue that the Biden economic plan is working,” he said.
All of those statistics were accurate. Yet the first question a reporter asked him when his prepared remarks were done was, “Do you take any blame for inflation?”
This exchange is the tale of Biden’s economy in a nutshell. The first two years of Biden’s presidency have given him lots of reasons to be satisfied, including efforts to combat the coronavirus that helped the economy rebound from its sudden drop in 2020.
But the economy has also been a big source of dissatisfaction: inflation hit a 40-year-high. Although inflation has waned over the past few months, it remains high and continues to pose risks to the broader economy.
On the one hand, Gary Burtless, an economist at the Brookings Institution,a Washington, D.C.-based think tank, said, “Relative to other industrialized countries, I think the U.S. has had an unusually rapid recovery from the pandemic recession.” He added that in many ways, Biden has continued gains that began under his predecessor, Donald Trump.
But inflation overshadowed many of these gains.
Although high inflation began because of supply-chain challenges during the pandemic, economists say Biden’s pandemic relief policies including the American Rescue Plan exacerbated matters, by giving Americans too much money to spend when goods and services supplies were too low, which drove prices higher.
It was Biden’s “most profound failure and policy error,” said Douglas Holtz-Eakin, president of the center-right American Action Forum.
On the eve of Biden’s 2023 State of the Union address, PolitiFact examined how some of the key statistics over the past few years have changed, including manufacturing jobs, gasoline prices, the stock market and consumer confidence.
The economic record is somewhere between the flawless version Biden touts and the grim outlook many Americans seem to have.
Before we start, it’s worth remembering that while presidential policies can impact the economy, no president can be fully credited with, or blamed for, everything that goes into the economy.
The good economic news for Biden
The nation’s overall unemployment rate has dropped sharply on Biden’s watch, from 6.3% when he took office to 3.4% in January. Although Black and Hispanic Americans continue to have higher unemployment rates than whites do, the trend for every racial and ethnic group has been to see declining unemployment rates. The Black unemployment rate has fallen from 9.2% to 5.4% over the same period, and the Hispanic unemployment rate has fallen from 8.5% to 4.5%.
The January 2023 rates, the most recent available, show unemployment rates for all categories at or near historically low levels.
Workers who do find themselves unemployed today are staying unemployed for less time.
Early in Biden’s term, the average period of unemployment (using the median) hit 20 weeks. For much of 2022, the average duration of unemployment lasted around nine weeks.
The pattern of job gains has (mostly) done what economists want to see to cool inflation. The economy has gained jobs every month during Biden’s presidency, but from August to December, the scale of job gains declined every month, before spiking again in January. The declining scale of monthly job gains was considered good news, because the more the economy cools on its own, the less pressure on the Federal Reserve to raise interest rates to curb inflation. It remains to be seen whether January’s job gains will continue into February and beyond, or whether they’re just a blip.
With his legislative focus on building infrastructure, Biden has prioritized creating manufacturing jobs. Here, too, he has something to crow about. With two exceptions, manufacturing jobs have risen every month of his presidency, with a net gain of 744,000 in all.
Industrial productivity has also headed higher on Biden’s watch. A productivity gain comes when something can be produced more quickly or more cheaply than was possible previously. It’s an important statistic because greater productivity means wages can be raised without nudging inflation higher.
During Biden’s presidency, the standard measure of the economy’s productivity has risen fairly consistently.
Where the economy is struggling
The worst economic metric on Biden’s watch has been inflation.
The year-over-year inflation rate maxed out around 9% over the summer, far above the Federal Reserve’s target of about 2%. But over the past six months, inflation has eased, approaching 6%. That’s still high, but it’s going in the right direction.
Another closely watched metric is gross domestic product, which refers to the sum total of all activity in the economy.
Early in Biden’s tenure, GDP was on the right track. GDP dropped rapidly during the pandemic recession when Trump was president, but grew by rates faster than the historical norm under both Trump and Biden. In three of Biden’s first four quarters, GDP growth exceeded 6%.
Then, the economy began shrinking. The economy contracted modestly in 2022’s first two quarters. This led to worries that the economy had already turned into a recession.
As it happened, no recession for this period has been officially declared — the official definition includes more than just two straight quarters of negative growth — and the subsequent two quarters turned positive. The two most recent quarters had GDP growth around 3%, which is in line with recent historical norms.
This doesn’t mean a recession won’t hit soon, but it makes it possible that the economy could have a “soft landing” from the Fed’s interest rate hikes.
High inflation has hurt workers by cutting into their wages.
For the first year and a half of Biden’s presidency, inflation-adjusted wages fell. But over the past two quarters, wage gains finally started to outpace inflation.
One notable trend below the surface is that lower-paid workers have gained more in wages, relatively speaking, than higher-paid workers, said Dean Baker, co-founder of the liberal Center for Economic and Policy Research.
This seems to have driven at least some workers back into the labor force. Labor force participation measures the percentage of the population 16 and older that is working or looking for work. The economy benefits when this percentage is higher, because it means more people are economically productive.
The good news for Biden is that labor force participation has risen, at least modestly, during his presidency. Still, it remains below its pre-pandemic peak. This metric suggests the pandemic has made Americans more reluctant to work, and prompted some of them to retire or forgo having a job.
The ratio of job openings to workers could push reluctant workers into the labor market. When Biden took office, there were more jobless people than job openings. Now, there are nearly two job openings per unemployed worker.
“This is fantastically high by historical standards,” Burtless said. “It indicates the unemployed have a lot of job openings to choose from.”
If there’s one economic statistic that grates on Americans, it’s the price at the pump.
When Biden took office, the economy was relatively weak because of the pandemic. As a result, demand for gasoline sagged, and prices were relatively low, around $2.40 a gallon. By February 2022, the eve of Russia’s war in Ukraine, the price had risen above $3.50. The war scrambled the world’s petroleum supply, and by midsummer, U.S. gas prices were pushing $5 a gallon.
Since then, the price has dropped to around $3.30. That’s far lower than the peak price, but it’s still higher than when Biden took office.
Another closely watched statistic is home values. They have risen through much of Biden’s presidency, giving homeowners increased net worth that they can unlock through home-equity loans. The downside is that higher prices make it harder for first-time homebuyers to enter the market.
Despite rising home prices, homeownership rates have risen modestly on Biden’s watch.
Stock market gains, consumer confidence have sagged on Biden’s watch
During Biden’s first year in office, the S&P 500, a broad stock market index, rose by about 20%. But in 2022, the S&P 500 gave away most of those gains, amid growing concerns about inflation and a possible recession.
Along with inflation, the stock market’s performance seems to have eroded the public’s economic confidence.
A widely watched University of Michigan survey shows consumer confidence fell after Biden was sworn in, but ticked up in the past few months as inflation eased. Whether this confidence uptick continues into Biden’s third year remains to be seen.