President Biden began his campaign in 2019 with a simple, if vague, promise to voters: he would return the country to the status quo if elected.
Then came the coronavirus pandemic, which plunged the United States – and the world – into unprecedented times, triggering the deepest but shortest recession in nearly a century, as millions of ‘Americans lost their jobs or were laid off. Biden pivoted: If elected, he has pledged to enact a sweeping, multi-billion dollar agenda that would reshape the economy and strengthen the middle class.
But progress has been slow in the year since Biden’s official inauguration: As the U.S. economy grows at a brisk pace, it faces challenges in the year ahead. due to repeated COVID-19 outbreaks, the highest inflation in nearly four decades, labor shortages and supply chain bottlenecks.
Here’s a look at the economic picture, one year into Biden’s presidency:
Over the past year, the economy has recovered around 6.4 million jobs, an average of 537,000 per month – more than in any other year on record. But the country remains at 3.6 million jobs below pre-pandemic levels in February 2020.
“This is a historic day for our economic recovery,” Biden said in brief remarks from the White House following the December jobs report. “Today’s national unemployment rate fell below 4% to 3.9%, the largest one-year drop in unemployment in U.S. history… Years faster than experts believe said we would be able to do it, and we’ve added 6.4 million new jobs since January of last year.”
WHERE ARE RISE IN CONSUMER PRICES HITTING AMERICANS HARDEST?
Wages rose 4.7% on the year and about 2 million Americans receive unemployment benefits, compared to 20 million who received assistance last year, before vaccines became widely available.
Yet hiring has often been slower than expected by experts – and many have attributed it to a shortage of workers, rather than sluggish demand. A record number of Americans have quit their jobs in search of higher wages, better working conditions or more ideal hours. At the end of November, there were 10.6 million open jobs, far more than the 6.9 million unemployed.
The number of available jobs exceeded 10 million for six consecutive months; before the start of the pandemic in February 2020, the highest record was 7.7 million.
“I think a lot of people are looking to get better,” Biden Labor Secretary Marty Walsh said recently. “They are leaving the jobs they had and they are going to look for better paying jobs and more opportunities.”
American consumers are grappling with the hottest inflation in nearly four decades, with the cost of daily necessities like food, rent and fuel oil rising in recent months.
And there is no evidence that the inflation spike is abating: earlier this month, the government announced that prices for US consumers jumped 7% in December from a year earlier, the increase fastest since June 1982.
Rising inflation is eating away at the strong earnings and wages and salaries American workers have seen in recent months: Real average hourly earnings rose just 0.1% in December, rising 0.5% inflation having eroded the total wage gain by 0.6%, according to Labour. Department. On an annual basis, real earnings actually declined by 2.4%.
The price squeeze was bad news for Biden, who saw his approval ratings fall to an all-time low as prices rose. Although the White House and the Federal Reserve have insisted that soaring inflation was just a weird side effect of the rapid economic reopening and would likely fade as the delays in shipping and temporary supply shortages were easing, they have since recognized that this is a real problem that needs to be addressed.
FED DOUBLE ITS DECONIC RATE, PLANS THREE INTEREST RATE HIKES IN 2022
The question now is whether the president can get the root causes of inflation — supply chain disruptions and labor shortages — under control before the 2022 midterm elections.
“We’ve faced some of the biggest challenges we’ve ever faced in this country in recent years, challenges to our public health, challenges to our economy. But we’re getting through it,” Biden said Wednesday during the his second White House Press Conference. “And not only are we getting through this, we’re laying the foundation for a future where America wins the 21st century by creating jobs at a record pace, and we need to get inflation under control.”
The Fed also changed course dramatically over the past month and pledged to normalize policy to quell soaring inflation.
“If we need to raise interest rates more over time,” Powell told the Senate Banking Committee during his confirmation hearing earlier this month, “we will.”
US economic growth got off to a strong start in 2021, growing at a revised annual rate of 6.4% in the first quarter and 6.7% in the second quarter. But a wave of COVID-19 infections over the summer, brought on by the highly contagious delta variant, forced consumers to cut spending, weighing on growth.
In the third quarter, the economy only grew by 2.3% on an annualized basis. It marked the slowest pace since the second quarter of 2020, when the economy was still in the grip of the shortest but steepest recession in nearly a century. The slowdown in the third quarter also reflected pandemic-induced disruptions in the supply chain that limited the availability of goods such as motor vehicles, as well as the evaporation of federal stimulus funds provided to businesses, households and to state and local governments.
GDP now, an up-to-date tracker monitored by the Federal Reserve Bank of Atlanta, currently estimates fourth-quarter growth at 5.1%.
Wall Street forecasters are cutting their growth projections for 2022 as hopes fade for Biden’s sweeping economic agenda and concerns grow over the novel COVID-19 variant.
Biden began his presidency with grand ambitions to approve nearly $4 trillion in federal spending that would be used to dramatically expand the government-funded social safety net and fight climate change.
The president scored early victories with a $1.9 trillion coronavirus relief package that Democrats passed in March and a bipartisan $1 trillion infrastructure bill that includes $550 billion in new financing for traditional projects such as roads, bridges, public transport and broadband.
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But the parts of Biden’s economic agenda that aimed to cement his legacy as a modern-day Franklin D. Roosevelt languished in the Senate. Biden’s initial proposal envisioned funneling more than $2 trillion toward progressive priorities like free community college, expanding Medicaid, establishing universal kindergarten and paid family leave, while being funded by a multitude of high taxes on wealthy Americans and affluent corporations.
Biden has spent months in torturous negotiations with moderate members of his caucus, and although it looked like there might be an agreement for a scaled-down bill at the end of the year, Senator Joe Manchin of West Virginia abruptly withdrew its support, citing high inflation and geopolitical uncertainty. The plan’s odds have since plummeted, though Democrats hope to pass a much narrower bill this year.