The Economic Paradox of the Biden Presidency

Labor pains

One of the more puzzling aspects of the U.S. economy is that employers have been on an almost uninterrupted hiring spree since President Biden took office — and analysts see no signs that the trend will reverse any time soon.

The paradox is that there is no guarantee that the jobs boom will keep Biden in the White House beyond November, completely scrambling the adage “It’s the economy, stupid” that wins elections.

For 39 straight months, employers have added jobs despite many predictions that the United States was destined for a recession. They have also faced a long list of challenges, that have hobbled many of America’s peers, including high inflation and interest rates; wars in Ukraine and Gaza that have sent energy prices soaring; and shipping turmoil in the Panama Canal, Red Sea and now the Port of Baltimore.

March was another blockbuster for jobs. The latest data released Friday overshot analysts’ expectations by a huge margin, with employers adding 303,000 jobs. That takes the tally over the past 12 months to more than 2.8 million hires — and economists expect the upward course to continue. “We do think there’s still room for growth” into next year, Jeremy Schwartz, a senior U.S. economist at Nomura, told DealBook.

It’s less certain if Biden will be able to capitalize on that in his race with Donald Trump. The White House heralded the latest numbers as “a milestone in America’s comeback,” and held it up as proof that the Inflation Reduction Act and CHIPS Act, two signature pieces of Biden’s agenda, were growing the economy.

But the red-hot labor market could just as easily exacerbate two of Biden’s big vulnerabilities: inflation, with strong wages fueling a surge in spending that pushes up prices on everything from gasoline to concert tickets; and higher-for-longer interest rates to counteract those price rises. A growing chorus of Wall Street analysts were forecasting that the Fed would be in no rush to reduce borrowing costs after yesterday’s report.