Biden faces a hard road to American economic recovery

Joe Biden faces a messy and unpredictable economic outlook, as both threats from rising inflation and slow employment growth shake confidence in the constancy of the U.S. pandemic recovery.

The U.S. Department of Labor reported this month that the pace of job creation it was significantly reduced in April, it fueled concerns about widespread discrepancies in the labor market.

It followed this report with figures released last week showing an unexpectedly strong jump last month consumer price index, exacerbating fears of rising inflationary pressures.

The data have exposed Biden to the sharpest criticism of his economic management by Republicans and have sparked hopes of a good rebound from the coronavirus crisis due to strong fiscal stimulus and the rapid implementation of vaccination. .

The USA has driven the global economic recovery, with the IMF forecasting gross domestic product growth of 6.4% in 2021.

“There are many signs of a resurgence of aggregate demand: an economy that is recovering, but that recovery will be chaotic,” said Wendy Edelberg, director of Project Hamilton, a Brookings Institution economic think tank. “And yes, really hard to manage.”

Senior Biden administration officials have warned not to draw too many conclusions from the one-month data. They argued that the creation of average monthly jobs over the past three months has been even stronger than in the previous quarter, which the rebound inflation it is likely to be transient and recovery is well on track.

But they have also recognized high levels of economic uncertainty at a time of major changes in spending patterns and employment trends, and as health-related constraints. they are getting up across the country faster than expected, in part because of the pace of the country vaccination campaign.

“There will be a period, as supply begins to equal demand and sectors recover and recover, [during which] there will be a bit of a spike, “Cecilia Rouse, chair of the White House Council of Economic Advisers, told reporters on Friday.

“We know that the mismatch between different parts of the economy will show up in unexpected ways until the economy recovers completely. As the president urged earlier this week, we need to be patient,” he added.

Criticisms of the administration’s economic policies, ranging from the former Democrat Treasury Secretary Larry Summers to Capitol Hill Republicans: They have seized the latest data to argue that the Biden administration has recklessly ruled out the risks of excessive fiscal stimulus and minimized economic warning signs.

“I was worried about inflation and everything moved much faster, much earlier than I had anticipated. That should make us nervous in the future, ”says Summers he wrote Friday on Twitter.

“I think there is a good chance that this will go well. And that we only have a super-fast recovery and a great year, “said Michael Strain, director of economic policy studies at the American Enterprise Institute, a conservative think tank.” I think there’s also a possibility that this will end. really bad “.

Other data released last week could not clarify the picture. University of Michigan Consumer Sentiment Index he showed long-term inflation expectations rose, while retail sales were flat last month after a big jump in March. On the brighter side, weekly unemployment claims fell to a low point on Thursday due to the pandemic.

At this stage, there were no indications from the White House of any major change in Biden’s political agenda to address the emerging economic landscape. In the area of ​​the labor market, the president enforced the requirement that citizens who were offered “suitable” jobs could not benefit from unemployment benefits and Rouse said the White House recalled companies a tax credit for employee retention established as part of their stimulus program.

The White House joins the fiscal support it has enacted with the help of Democrats in Congress not only to bring about the country’s recovery, but also to help low-income families. He has also expressed his confidence in the Management of the Federal Reserve any increase in inflation.

But Republicans and conservative economists have called for more dramatic actions to cool the economy, such as an early end to federal unemployment benefits, which Republican states across the country have refused to pay.

Meanwhile, economists whose forecasts were severely damaged by data released in recent days warned that any assumptions about the U.S. recovery (let alone policy changes) may need to be reconsidered.

“We’re in such unfamiliar territory,” Edelberg of Project Hamilton said. “When you talk about the changes in aggregate demand we’re experiencing and the changes in supply we’re experiencing, regardless of the uncertainty you have about inflation in normal times, increase it by an order of magnitude.”