Dem
51
GOP
49
Maybe it's the economy, stupid, and maybe not, but the May economic report saw a red-hot economy create 339,000 jobs in the past month. This is far more than expected. Unemployment is near record lows, which could help Joe Biden in 2024. Basically, anyone looking for a job can probably find one. However, inflation is still with us, although slowing down.
The $64,000 question is whether the Fed's attempt to tame inflation will trigger a recession, for which Republicans would naturally blame Joe Biden rather than Fed Chairman Jerome Powell, who was initially appointed by Donald Trump. After three regional banks collapsed and the House Freedom Caucus tried to shoot the economy, a lot of people were very worried about a possible recession or depression. However, with the new jobs report, the outlook is now brighter. In fact, the Dow Jones index jumped 701 points on Friday after the jobs report came out. That doesn't mean that we are out of the woods though. The Dow Jones index is a good indicator of what investors are thinking right this minute, not whether there will be a recession in 6 months.
A big question now is what the Fed will do. Powell has said that the labor market needs to "soften" to bring down prices. "Soften" is economist-speak for millions of people losing their jobs. The May report shows the opposite is happening, although the unemployment rate edged up slightly to 3.7% in May, but still close to a historical low. The addition of new jobs and the unemployment rate going up at the same time is not inconsistent. In May, 339,000 new jobs were created but more than 339,000 people who were not seeking jobs started looking for them, thus technically raising the unemployment rate. Some of the new job seekers were probably high school and college graduates suddenly on the job market for the first time. Someone who was a student in April would not be counted as unemployed but if that person graduated in May, he or she would now be counted as unemployed—even if that person had a job lined up starting June 1.
One detail that could be a forewarning of what's to come is that Black unemployment went from 4.7% to 5.6%. This cancels out some of the gains that Black workers made in recent months. Black employment is always seen as fragile and sometimes augurs what's next. On the other hand, Latino unemployment fell from 4.4% to 4.0%.
If the economy continues to create jobs but inflation comes down to normal levels, Joe Biden will be in the catbird's seat in 2024. That will be doubly so if wage gains outpace inflation. If there is a recession, he will have a big problem, especially against Donald Trump who will tout the economy when he was president, even though he simply inherited it from Barack Obama. (V)