Washington, D.C. There hasn’t been the recession that many economists had predicted.
Customer trust is growing.
The market for stocks has surged to record highs.
And on Friday, the Labor Department released a strong jobs report, indicating that the US economy added 353,000 jobs in January, almost twice as many as predicted.
One of President Joe Biden’s greatest weaknesses as he runs for reelection this fall—likely against Republican front-runner Donald Trump—has long been seen to be his inability to persuade voters that the economy is improving despite persistent inflation.
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However, the consistent positive economic news, which was topped off by Friday’s huge jobs report, indicates that things may be changing and that by the time of the November election, the economy might work to Biden’s advantage.
According to Mark Zandi, chief economist at Moody’s Analytics, “the economy is about as good as it gets,” with the one flaw—inflation—that is “still stinging” but getting less severe. “I think with each passing month, his case will strengthen,” Zandi said on Biden, “and people’s perceptions will align more with his message.”
Polls have consistently shown that Americans disapprove of Biden’s handling of the economy, making it a weak point for him. That has been partially caused by a glaringly uneven recovery after the pandemic.
More wealthy households have profited from the economic recovery than others. The majority of Americans who are middle-class or have modest incomes have been negatively impacted by rising food and other commodity prices. Furthermore, mounting student loan debt and rising housing costs have made many people feel even more financially anxious.
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.
“The world’s strongest economy is that of the United States. We saw additional evidence today,” Biden stated in a statement.
Further: “I don’t want to be Herbert Hoover,” says Donald Trump, expressing his hope that the economy collapses this election year.
Republicans have continued to criticize Biden over the economy, but even former Trump administration director of the National Economic Council Larry Kudlow termed the jobs data “a blowout.”
Telling Fox News, “I know many of my conservative friends are trying to drill holes in this report,” Kudlow stated. “But people, guess what? That’s just the way things are. This report is excellent. Not all economic statistics need to be interpreted politically.
According to an estimate issued this week by the International Monetary Fund, the value of all goods and services produced in the United States increased by 2.5% last year, more than any other major economy in the world. This year, the US economy is predicted to develop at a greater rate than that of any other country.
The Dow Jones Industrial Average has surpassed 38,000 for the first time ever as the stock market has been rising steadily for months. It’s so powerful that Trump, who last week told his followers that the hot stock market is the result of investors projecting a Trump victory in the autumn, now wants credit for it. Trump had earlier forecast a financial crash if Biden won the 2020 election.
In response, White House spokesman Andrew Bates made fun of Trump, 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.”