An election-year jobs report showing a strong job market, rising wages and low unemployment would typically be an unqualified gift to an outgoing president.
But 2024 is not a typical election year, and for President Joe Biden, even the best news has its downsides.
The latest staggering study from the Labor Department showed that U.S. employers added 272,000 jobs in May, dashing expectations that nonfarm wages would reflect a slowing market as other indicators point to a slowing economy . The average hourly wage also increased at an annual rate of 4.1 percent, outpacing the rate of inflation. And even though the unemployment rate reached 4% for the first time in more than two years, it still remains below historical norms.
“Once again, payroll growth is making a mockery of your expectations,” said Martha Gimbel, a former Biden economic adviser and now executive director of the Yale Budget Lab. posted on.
The supercharged labor market will provide Biden and his Democratic allies with work to do on the campaign trail as they work to convince voters that the economy is much stronger than public polling suggests. But it also poses a major obstacle to the Federal Reserve lowering interest rates for businesses and consumers.
Other recent economic indicators have hinted at a slowdown in U.S. growth, which had given investors hope that the Fed could cut rates before the end of the year, perhaps even before the November election . The Commerce Department last week cut its estimates for first-quarter gross domestic product growth to an annual rate of 1.3 percent, well below the pace of last year’s fourth quarter. Growth in real disposable income has slowed and the PCE index – the Fed’s preferred inflation gauge – showed that consumer spending slowed in April. The European Central Bank and Canada announced rate cuts earlier this week as global inflation eased.
However, the May jobs report “creates a sense that the Federal Reserve may fall further behind its fellow global central banks which have moved toward cutting restrictive rates,” wrote Joe Brusuelas, chief economist at RSM US LLP.
Minutes after Friday’s jobs reports were released, investors reduced the likelihood that Fed Chairman Jerome Powell and other policymakers would cut rates before the fall, according to CME’s FedWatch tool.
That could create challenges for Biden as Election Day approaches. High borrowing costs on mortgages and credit cards have tempered the way consumers what I think about the economy. Consumer confidence improved last month, according to the Conference Board’s monthly survey, but more Americans expect higher interest rates over the next year.
“The Great American Comeback continues, but we still need to make more progress,” Biden said in a statement Friday.
The pro-Trump organization Maga Inc. issued a statement saying the jobs report presented a “dire picture for the U.S. economy” as more foreign-born workers enter the job market. work.
