But that suddenly changed on Friday, when June’s jobs report showed a big jump in the proportion of Americans aged 25 to 54 in the labor market — rising to a level not seen since the early days of the pandemic. (This metric is known in economist-speak as the “prime age labor force participation rate,” as it excludes older workers who may be entering retirement.) White House economists identified that as one among many data points suggesting the U.S. economy is starting to spring to life, buoying the president as he seeks to approve a sweeping domestic policy agenda.
“I’d been waiting to see movement in this category — we don’t want to build too much out of one month, but this is an important bump,” said Jared Bernstein, a member of the White House Council of Economic Advisers, in an interview. “Economists widely agree that this is a critical group to watch as they’re the age range we expect to be most connected to the job market.”
As the nation tries to recover from the pandemic, Biden’s team has been buffeted by economic head winds that threaten to derail his agenda in his presidency’s first year. The warnings have come fast and furious — over rising inflation, anemic jobs numbers, supply chain bottlenecks, commodity shortages, exploding government debt and myriad other threats to the nation’s economic well-being. Critics, including former colleagues of many leading Democratic officials, assailed the size and scope of the White House rescue plan as wasteful and ineffective. Tepid jobs data from March to May appeared to bolster the naysayers, or at least complicate the administration’s defense of its policies.
But now signs are emerging that the economy is starting to ignite, a trend punctuated by a June jobs report that came in much better than expected. The economy added 850,000 jobs in June, up from 583,000 in May and 269,000 in April. Unemployment claims earlier this week sank to their lowest level since the pandemic started, also much better than forecast.
The nonpartisan Congressional Budget Office projected inflation would remain elevated for much of this year but drop markedly in 2022, deflating at least some of the alarm around higher prices. Some vexing supply chain problems have begun to resolve. The CBO also doubled its economic growth projections for the United States, estimating the economy would expand by more than 7 percent this year. That would be the highest pace since 1984.
“It’s feeling rip-roaring right now. Everything’s sticking to script. I don’t think you could ask for better numbers,” said Mark Zandi, chief economist at Moody’s Analytics. “The White House has to be feeling very good about the way things are playing out.”
Both administration officials and economists are at pains to stress that a single month of data is not dispositive of future trends. Republican lawmakers and other economists say that inflation remains a major concern that could prove hard for the central bank to manage. A new variant of the coronavirus may hamper the fragile progress made so far, and cases are rising in Europe for the first time in weeks.
The economic damage from the coronavirus remains massive. The U.S. is still down close to 7 million jobs from before the pandemic. The unemployment rate for Black Americans is 9.2 percent. While the “prime age” labor force participation rate is ticking up, the overall labor force participation rate was unchanged. The unemployment rate actually went up in June, although economists caution that is a result of an expanding labor pool.
“Workers are still staying on the sidelines, and while wages are going up, prices are going up faster. These are troubling signs for families and Main Street businesses,” said Rep. Kevin Brady (R-Tex.), the top Republican on the House Ways and Means Committee, in a statement.
Brady said that the U.S. remains approximately 700,000 jobs short of the jobs predicted by Zandi, and cited by the administration, when the stimulus bill was passed. Asked about the criticism, Zandi pointed out that only amounted to a few weeks of job gains at the current pace.
Doug Holtz-Eakin, president of the conservative American Action Forum and former director of the Congressional Budget Office, warned of the risk of a “wage-price spiral” in which worker pay and prices skyrocket simultaneously in an attempt to catch up with the other. Holtz-Eakin, predicted the worst of it would likely come in the second half of 2021.
“If you see people demanding higher wages in anticipation of inflation, then you got a problem,” he said. “Something is going to happen — the question is for how long and how bad it is.”
But despite those concerns, eye-popping data — and the superlatives to go with them — have started to increasingly come in the administration’s favor.
The share of consumers who believe jobs are “plentiful” has jumped to a 21-year high.
Wages have begun to jump dramatically for workers in the leisure and hospitality sector.
High levels of demand are expected to continue sluicing through the economy, since key parts of the stimulus — including state aid and a new child benefit — have not yet worked their way through the economy.
Some business leaders are crowing about the economy’s direction. National Retail Federation Chief Economist Jack Kleinhenz said earlier this week: “It has become clear that the U.S. economy and retail sales are growing far faster and more steadily than anyone could have expected just a few months ago.” Wall Street analyst Chris Rupkey called today’s figures a “monster jobs report” and said the labor market is “red hot.”
The domestic political implications of a hot economy are unclear. Biden’s first big effort through Congress, the stimulus, was propelled by a sense of emergency that may fade on Capitol Hill. But strong economic growth may boost Biden’s political popularity, which could help on lean on Congress to approve his multi-trillion-dollar spending plans.
“Good morning, everyone. It is a good morning,” Biden said in his remarks about the jobs numbers on Friday. “The last time the economy grew at this rate was in 1984 — and Ronald Reagan was telling us it’s ‘Morning in America.’ ”