WASHINGTON — The recession many economists predicted has not happened.
Consumer confidence is rising.
The stock market has risen to all-time highs.
And on Friday came a robust jobs report: According to the Labor Department, the U.S. economy added 353,000 jobs in January – nearly twice as many as forecast.
President Joe Biden's struggle to convince Americans of an improving economy in the face of stubborn inflation has long been seen as one of his biggest burdens as he seeks re-election this fall, likely in a rematch against Republican front-runner Donald Trump.
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But the repeated good economic news – capped by Friday's blockbuster jobs report – suggests the tide could be turning and the economy could potentially become a strength for Biden leading up to the November election.
“The economy is as good as it's ever been,” said Mark Zandi, chief economist at Moody's Analytics, adding that even the only blemish – inflation, which “still hurts” – was becoming less painful. “I think with every month that goes by, his cause will grow stronger,” Zandi said of Biden, “and people’s perceptions will become more consistent with his message.”
The economy has long been a weak point for Biden in polls, with polls showing Americans disapproving of his handling of it. Part of the reason for this is the extremely uneven recovery from the pandemic.
Wealthier households benefited more from the economic improvement. Meanwhile, middle class and low-income Americans are suffering the most from higher prices for food and other goods. And high student debt and rising real estate prices have increased economic fears in many households.
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But January's job gains exceeded economists' forecasts that 185,000 new jobs were added last month. The unemployment rate remained stable at a low 3.7%, remaining below 4% for 24 months, the longest stretch since the 1960s. The US economy has now created 14.8 million jobs since Biden took office – an increase of 5.4 million jobs more than before the Covid-19 pandemic.
“America’s economy is the strongest in the world. Today we saw more evidence,” Biden said in a statement.
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Even Larry Kudlow, former director of the National Economic Council in the Trump administration, called it a “tough” jobs report, despite Republicans' continued criticism of Biden over the economy.
“I know a lot of my conservative friends are trying to pick holes in this report,” Kudlow said on Fox News. “But you know what, guys? It is what it is. It is a very strong report. Not every economic statistic should be viewed through a political lens.”
U.S. gross domestic product, the value of all goods and services produced in the U.S., grew 2.5% last year, more than any other advanced economy in the world, according to an International Monetary Fund analysis released this week. The U.S. economy is expected to continue to grow faster than all other nations this year.
Meanwhile, the stock market has been on a steady upward trend for months, with the Dow Jones Industrial Average breaking above 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 was the result of investors predicting a Trump victory in the fall .
White House spokesman Andrew Bates then mocked Trump, saying: “We welcome the wide range of ideologically diverse voices who admit that President Biden is creating an economy that actually benefits hard-working families – and not just.” Billionaires or executives of multinational corporations.”
Consumers are increasingly confident that inflation will fall
The improving economic trends are not entirely new.
For a year, the White House has sought credit for a robust job market and growing economy, calling Biden's economic agenda “Bidenomics.” But Biden failed to calm economic fears for one reason in particular: high inflation.
Although inflation has slowed significantly since hitting a 40-year peak of 9.1% in June 2022, it has been a winding downward trend. Consumer prices rose slightly year-on-year to 3.4% in December, compared to 3.1% in November. The cost of services like rent, car repairs and car insurance have increased.
But there are new signs that Americans are becoming less worried about inflation.
According to the widely cited University of Michigan Consumer Survey, consumer sentiment has risen 29% in the past two months, the strongest two-month increase since 1991. This is largely the result of an improving outlook for inflation and personal finances. The consumer confidence index is now 60% above the all-time low recorded in June 2022 and at its highest level since July 2021.
“This level of support across the population and across different sectors of the economy is rare,” said Joanne Hsu, director of the University of Michigan Consumer Index Survey. She said consumers would be cautious in the fall to assess whether the inflation slowdown will continue. “After so many months of sustained slowing inflation, I believe consumers are finally feeling safe. They’re ready to breathe.”
Moody's Analytics predicts a Biden victory based on economics
A Quinnipiac University poll this week showed Biden leading Trump 50% to 44% among registered voters nationwide, extending his 1-point lead the same pollster had in December. Importantly, Biden leads the majority of independent voters, 52% to 40%, who will be crucial in the 2024 election.
A majority of voters, 55%, said they disapproved of Biden's handling of the economy, compared with 42% who said they approved. Still, it represented a slight improvement from Quinnipiac's December poll, in which just 39% approved of Biden's handling of the economy.
“Things are finally starting to come together,” Biden said last week during a stop in Superior, Wisconsin, as he reflected on the surge in consumer confidence. “We passed a lot of really good laws. We knew it would take some time for them to catch on. But now it has caught on and is stimulating the economy.”
However, according to the University of Michigan survey, consumer sentiment is still 7% below the historical average, suggesting that many Americans still want to see lasting economic improvements before their fears subside.
And with the exception of the Quinnipiac poll, Biden still trails Trump in most head-to-head polls and in several key battleground states.
Nevertheless, Moody's Analytics predicted a narrow victory for Biden over Trump in its presidential election model released on Thursday. The forecast is based on the country's economic conditions, which have historically been important election indicators – such as gasoline prices, household income, mortgage rates and consumer confidence – as well as political factors.
“Biden has an advantage because he has the economy behind him,” Zandi said. “There is economic tailwind for his re-election. If everything sticks to our script, it will only get worse as voters get closer to the election.
Reach Joey Garrison on X, formerly Twitter, @joeygarrison.
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