Labor pains
One of the more surprising aspects of the US economy is that employers have been hiring almost nonstop since President Biden took office — and analysts see no signs that the trend will reverse anytime soon. immediately.
The irony is that there is no guarantee that jobs growth will keep Biden in the White House after November, completely contesting the saying “The economy, stupid” won the election.
For 39 straight months, employers have added jobs despite many predicting that the United States is headed for a recession. They also face a long list of challenges, which have troubled many of America’s peers, including high inflation and interest rates; wars in Ukraine and Gaza driving up energy prices; and shipping chaos in the Panama Canal, the Red Sea and now the Port of Baltimore.
March was another blockbuster for jobs. The latest data released on Friday exceeded analysts’ expectations by a large 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 think there’s still room for growth” next year, Jeremy Schwartz, a senior US economist at Nomura, told DealBook.
It’s less certain whether Biden will be able to capitalize on that in his race against Donald Trump. The White House announced the latest numbers as “a milestone in America’s comeback,” and held it as proof that the Inflation Reduction Act and CHIPS Act, two signature pieces of Biden’s agenda, are growing the economy.
But the overheated labor market could just as easily exacerbate two of Biden’s big weaknesses: inflation, with strong wages fueling a surge in spending that is pushing up prices on everything from gasoline to concert tickets; and higher-for longer interest rates to counter price increases. A growing chorus of Wall Street analysts predicts that the Fed is in no rush reduce borrowing costs after yesterday’s report.
(At the market close yesterday, traders pushed back their predictions for the Fed’s first rate cut to come in July, rather than June.)
Biden’s poll numbers hover around those of many one-term presidents. Voters say they disapprove of his handling of the economy, even though he is leading, according to many indicators, a world beater. “When it comes to the economy, vibes are at war with facts, and vibes are winning,” Greg Ip of The Wall Street Journal wrote this week.
Some doubters are beginning to change their tune. Yesterday’s jobs report “calls our bear case for the economy in question,” said Thomas Simons, an economist at Jefferies who predicted the United States would fall into recession this year, wrote in an investor note. Mohamed El-Erian, an economist and consultant at Allianz, had a similar change. He told Bloomberg TV that the latest jobs numbers “confirm US economic exceptionalism.”
There is still a lot of bad news in the economy. Americans (young and old) are worried about their retirement savings. They have too accumulated credit card debtand their savings are dwindling.
But the labor market remains a bright spot. Wages are growing, as is the labor-participation rate, which climbed from 62.5 percent to 62.7 percent as 469,000 people joined the labor force last month. The postpandemic economic recovery has resulted in broad gains in racial and income divides, Schwartz said.
Nomura watches a specific metric to gauge an incumbent’s chances: the “distress index.” This is a simple calculation that adds the inflation rate to the unemployment rate. Presidents with higher misery index numbers tend to lose their bids for re-election.
Biden’s distress rating has remained relatively high throughout his presidency. But that number has fallen in line with the rate of inflation, and the latest jobs report should further reduce it.
The question is whether Biden’s misery index will fall enough to put him in the ranks of Ronald Reagan and Barack Obama, who rode late economic recoveries in their first terms to win again — or will he be closer to President George HW Bush, who lost Round 2 in 1992?
In other words, will voters give Biden credit for jobs, or blame him for inflation?
IN CASE YOU MISS IT
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Tesla sales fell down Elon Musk’s electric car company reported its first quarterly year-on-year sales decline since 2020, and warned of “significantly lower” growth this year. Tesla’s results reflect a broader slowdown in the EV market, but some prominent investors also blamed Musk’s “toxic behavior” for the brand’s demise. Tesla stock has fallen more than 30 percent this year.
Endeavor plans to go private as part of a deal with Silver Lake. Ari Emanuel’s company, which owns talent agencies IMG and WME, will cease to operate as a listed entity three years after going public. Silver Lake will buy the Endeavor shares it doesn’t already own in a deal that values Endeavor at about $13 billion. The company failed to achieve its ambitious plans to turn it into a media powerhouse that produced content as well as represented top stars like Dwayne Johnson and Oprah Winfrey.
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On our radar: ‘Face-Off: The US vs China’
The United States and China have tried to stabilize relations in recent months, but underlying tensions between the world’s two largest economies are nowhere near abating. Treasury Secretary Janet Yellen criticized Beijing during a trip to China in recent days, accusing it of “coercive actions against American companies” and warning that its state-backed manufacturers are distorting global markets.
The sharp rhetoric came just days after a parade of chief executives met the Chinese presidentXi Jinping — a sign that they want to stay there despite the perceived challenges.
“Face-Off: The US vs China” is an eight-part podcast starting Tuesday that aims to explain the relationship and why the stakes are so high. The series is hosted by Jane Perlez, a former New York Times Beijing bureau chief who is now at Harvard’s Kennedy School, and features a leading historian, Rana Mitter. Perlez told DealBook that the goal is to offer listeners a “rational approach” to understanding one of America’s greatest challenges.
Perlez and Mitter discuss everything from Apple’s remarkable rise in China and the future of Taiwan to Chinese espionage and the personal relationship between Biden and Xi, and they interview diplomats, spies, tech and military expert — even Yo-Yo Ma.
