President Joe Biden described the May jobs report as a starting point for more spending on infrastructure and education to maintain growth – essentially an argument for his agenda. But jobs figures released on Friday also hinted at possible limits on government aid that can be pumped into the world’s largest economy.
“We’re on the right track,” Biden said. “Our plan is working. And we’re not going to let go now. We will continue to move forward. I am extremely optimistic.
The May Jobs Report showed the complexity of restarting the economy from a pandemic shutdown and the mixed signals that can result from an unprecedented increase in government spending in the economy. Biden can praise his administration on creating 559,000 jobs and an unemployment rate of 5.8%, but hiring was lower than many economists expected after his $ 1.9 trillion rescue plan.
Biden’s challenge is to convince Americans that his administration’s relief efforts to date have worked well enough to maintain faster growth, instead of creating inflation and imbalances that could undermine public support for his administration. plans to invest at least an additional $ 3 trillion in roads, clean energy, children and schools.
The report suggests there aren’t enough people looking for jobs, a possible problem for a president who hopes his bailout will put the country back to full employment by 2022. While Biden considered With employment figures as a rushing argument for its agenda, several economists were calling for some caution to see if more Americans start looking for jobs after the significant losses caused by the coronavirus pandemic.
Republicans, for their part, have found ways to turn the jobs report into an argument against Biden’s plans to fund more government programs through tax increases on the rich and on corporations. Their concern is that generous unemployment benefits have kept people from accepting jobs and that government assistance – much of it yet to come – will fuel inflation.
Texas Representative Kevin Brady, the top Republican on the House Ways & Means Committee, said Biden should divert more of the COVID-19 relief money to infrastructure.
“If we’re going to help families build their lives and rebuild the US economy for the long term, it’s time for emergency spending and endless government checks to end,” Brady told Fox Business.
The big red flag in the jobs report was that the labor force participation rate had dropped to 61.6%. Despite government spending, it is essentially unchanged from last summer and down from 63.3% before the coronavirus hit 14 months ago. The lower participation rate means that a recovering economy does not encourage enough people to find work.
For some economists, this is proof that Biden’s $ 1.9 trillion relief plan was likely overkill. Government spending has so far generated more demand for workers and goods than the economy could produce, perhaps warranting some Republican criticism.
“We have a general idea of what is going on at this point: we are not able to create the jobs fast enough compared to the demand we are injecting into the economy,” said Marc Goldwein, senior vice president of the Committee for a Responsible Company. Federal budget.
Goldwein and other economists have said they believe Biden’s aid program has helped the economy, although the same results could have been achieved for less money. It is also possible that the relief plan’s expanded unemployment benefits have supported consumer spending and that upcoming state and local government aid is keeping workers on payrolls – which could have helped to increase the number of ‘jobs.
Harvard University professor Jason Furman, former chief economist at the Obama White House, said it was surprising turnout dropped in a month as vaccinations progressed, COVID infections -19 were decreasing, vacancies were increasing and wages were increasing.
Because the demand for workers is greater than their current supply, the silver lining for Biden is a sharp increase in average hourly earnings. This is a clear advantage for American workers that can be sold during the election campaign, but the risk of too rapid a rise in wages lies in levels of inflation that could stifle growth.
Furman urged patience in a recent paper, arguing that the demand for workers will most likely lead to an increase in the supply of people looking for work.
“In the meantime, there would be more price inflation, but over time it would be offset by an economy that would revert to something that might even be better than its pre-pandemic trajectory,” he said. he writes in an article with Wilson Powell III for the Peterson. Institute of International Economics.
Biden acknowledged the difficulty of reviving the economy after the pandemic-related shutdowns, noting that it was not as easy as flipping a switch. One of the main issues is the bottleneck for computer chips, used cars, and a range of raw materials that can lead to higher prices. These short-term bottlenecks drive up prices and could make it more expensive to finance infrastructure projects.
Brian Deese, director of the White House National Economic Council, said the administration plans to release a review next week on how to make supply chains more resilient. But some of the current mismatches are short-term and will need to be addressed by market forces.
“On a lot of these issues,” Deese said, “there is no quick, short-term quick fix.”