Jobs report fuels White House optimism that recession will be averted
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WASHINGTON - White House officials are expressing cautious optimism that the economy will not tip into recession this year, as a strong jobs report and new wage data give the administration a boost after months of brutal economic headlines.
President Joe Biden and his top surrogates have argued for months that economic growth and hiring are strong enough to overcome the Federal Reserve's moves to raise interest rates. That narrative has been viewed skeptically by many economists and Wall Street analysts, who have seen intensifying signs of a slowdown both domestically and globally.
But new economic data released last week appeared to bolster the administration's case, with the Labor Department reporting on Friday that 372,000 new jobs were created in June while the unemployment rate held at 3.6%, among the lowest rates ever. Economists in the White House stress that it is too soon to declare victory, as the central bank is expected to continue to try to cool off the economy with additional interest rate hikes. But administration officials emphasized that the brisk hiring pace suggests that an economic slowdown is not yet hitting the country.
"I think if you want to talk about recession nervousness, you should look at today's jobs report. Numbers like this are just very much inconsistent with any kind of recession call," Jared Bernstein, a member of the White House Council of Economic Advisers, told MSNBC shortly after the jobs report was released on Friday. "When you're generating 350,000 jobs on average for the past quarter - not recessionary."
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Voter frustration about the economy has proved to be one of the most persistent challenges to the administration over the past year, with huge shares of the electorate angry about rising prices. Inflation in May hit 8.6%, a 40-year high, with energy costs in particular squeezing American consumers, in part due to the disruption caused by Russia's invasion of Ukraine. Biden's approval ratings on the economy have fallen steadily amid inflation, which has bedeviled the administration since officials first dismissed it as "transitory" last year.
More recently, the White House has been concerned that the economy could careen from inflation to recession, if the central bank is forced to slam the brakes on the economy too quickly. But, there, too, Biden aides have seen some encouraging signs. Gas prices have fallen consistently over the past three weeks from their highs in June, while mortgage rates - after spiking to around 6% - tumbled. U.S. manufacturing has surpassed its pre-pandemic levels. Stock market indexes, after slumping to the worst first six months of any year since 1970, have appeared to stabilize in recent weeks.
Additionally, annualized wage growth fell from 4.6% to 3.8% from May to June, a healthy sign amid the expansion of the labor supply, according to Adam Ozimek, chief economist at the Economic Innovation Group, a nonpartisan business organization. That suggests the workforce is growing to meet higher demand, reducing inflationary pressures, Ozimek said - rather than demand contracting in the face of a smaller workforce. Bernstein similarly said the deceleration in wage gains "is very much in the spirit of what the president is talking about when he talks about transitioning from a breakneck pace, economic growth, to one that's a more steady, stable transition." Bharat Ramamurti, deputy director of the White House National Economic Council, posted a meme on Twitter of Usher to tease the media for hyping recessionary fears.
"Although the situation is not necessarily worse, the mood around economic management in the White House is much worse than it was even when many of these same people were trying to navigate the economy through the depths of the financial crisis. It has felt grim and hard to navigate politically, even to the scale of the damage," said one outside White House adviser, speaking on the condition of anonymity to describe private conversations with administration officials. "But this is one day where nothing bad happened."
Other economists see more mixed evidence from the recent data. Economic growth also has gone wobbly, with the nation's gross domestic product contracting in the first quarter of this year and forecast to do so again in the second quarter, according to numerous analysts. The mismatch between strong employment and weak economic growth is unusual but suggests a potential slowdown outside the labor market.
And Skanda Amarnath, executive director of Employ America, a left-leaning think tank, pointed out that one of the two surveys of employment showed potentially troubling signs. The payroll survey, which contacts firms, showed the healthy improvement. But the other, less-cited survey, which interviews households, showed uneven results for the third straight month. That household survey showed jobs falling in April, rising slightly in May, then falling by 315,000 in June.
"We have one survey telling you things are all fine, and there's another survey that shows at least a flatlining of progress after showing considerable progress last year," Amarnath said. "I don't think there's a reason to panic - but there's a reason to be on elevated alert. The job market is slowing in this survey."
Amarnath added: "The trend has shifted from breakneck recovery to a flatlining, or, at least, less improvement. Maybe April through June will prove to be flukes. ... But we're in the midst of a slowdown, and we should be careful about the claims we're making about the state of the economy."
Still, the White House is projecting confidence. "The strength of this labor market is historic," said Brian Deese, chairman of the White House National Economic Council, in an interview on MSNBC. Deese stressed that the American private sector has now recovered all the private sector jobs lost during the pandemic, calling it an "important milestone."
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