President Joe Biden enters a 2022 midterm election year set to address what economists call the “supply” problem
This is also a political problem. The mismatch obscures the strong growth achieved during Biden’s first year and the 3.9% unemployment rate, the kind of performance that would typically help the president and congressional Democrats woo voters in the midterm. This has left Biden trying to showcase his economic achievements, while Republicans are trying to stifle criticism that his policies have fueled inflation.
“This is the kind of recovery I promised and hoped for for the American people,” the president said in remarks Friday. “My focus is on keeping this reform strong and sustainable, even if there’s Republican constraintism. Because, you know, I know that even though jobs and households’ incomes have improved, families still have to deal with prices and costs.” Feeling lacking.”
Pessimism has overshadowed Americans’ views on the economy, even though the economy is objectively better in 2020 than just before Biden took office. The index of consumer sentiment, tracked by the University of Michigan, is down 12.5% from a year ago, while people have been vaccinated and 6.4 million jobs added in the past 12 months.
Buyers are focusing on shortages of cars, bath towels and even breakfast cereals. Employers may not fill the 10.6 million jobs they advertise, as Friday’s employment report found only 199,000 jobs in December. Prices of almost everything are rising — forecasters expect a 7.1% annual increase in next Wednesday’s inflation report.
House Republican Leader Kevin McCarthy brushed off the apparent positives in the economy and blamed the administration for any shortfalls.
“It’s been almost a year since President Biden, and our economy is still missing millions of pre-pandemic jobs, consumers are facing inflationary pressures that haven’t been felt in nearly 40 years, and Employers continue to struggle with persistent labor shortages,” the California lawmaker said in a statement.
As a policy and a political challenge, White House officials say they are figuring out how to ramp up the supply of workers and goods this year as the pandemic and supply chain issues loom. They will have to do that while maintaining consumer and business demand, the two pillars of economic strength that are a byproduct of last year’s $1.9 trillion coronavirus relief package. The administration expects inflation to come down, yet it is unwilling to wait for that to happen.
The administration sees the supply factor as the only viable solution, as the alternative would be to cut government spending to reduce demand, which hurts people’s well-being and ability to spend and invest.
Jared Bernstein, a member of the White House Council of Economic Advisors, said, “We have very strong demand in this economy, and we have constrained supply. There are two ways to go after that imbalance. You can break the demand side.” And essentially make people poorer, so that they don’t have the resources they want. Or, you can try to expand the supply side – that’s what we’re doing.”
Biden announced several initiatives to close off supply chains so container ships can dock faster and big-rig trucks can get off the road faster with full trailers. Efforts include a $1 trillion infrastructure legislation as well as executive actions to increase the number of commercial truck drivers and a plan to increase domestic production of computer chips.
The White House says it is already fixing the supply chain. It issued a memo reporting an increase in store inventory in shipping containers waiting at ports for nine days or more and a 39% decline since November.
Biden has also said that his proposed investments in child care, families and health care — which have been stalled in the Senate — would address supply constraints by making it easier for more parents to work. Yet his arguments for nearly $2 trillion in spending and tax increases fail to impress West Virginia Sen. Joe Manchin, the decisive Democratic vote, who fears inflation and wants families receiving child tax credits to have jobs. are.
At the heart of the labor shortage is also the constant threat of a pandemic. The initial wave in 2020, followed by Delta and now Omicron variants, has made it difficult for people to go back to work or train for new businesses. This has worsened labor shortages and supply chain challenges and inflation.
“The virus remains the biggest issue in the economy today,” said Aaron Sojourner, an economist at the University of Minnesota. “Millions of workers are missing from work every week because they have COVID symptoms or are caring for someone with symptoms, and people without vaccinations are 2.4 times more likely to miss work.”
Sojourner estimated that only 39% of working-age Americans are fully vaccinated and have received a booster shot. This leaves 36% of those who need a booster and 25% who were never fully vaccinated.
Heather Bouche, a member of the White House Council of Economic Advisors, said the pandemic had caused widespread unemployment and disorganization for families and businesses. But she said supply chain challenges have been difficult to address because of their global nature and the fact that they include some long-standing challenges that are distinct from the coronavirus.
“It’s not just in the United States – it’s a global issue,” Bouche said.
Tyler Goodspeed, an economics adviser in the Trump administration who is now a fellow at Stanford University’s Hoover Institution, said Friday’s employment report showed how hard it can be to boost the number of job-seeking workers.
The report came ahead of the possible impact of the Omicron version of the coronavirus, which has led to the closure of schools and some businesses. Yet it showed the percentage of people in the labor force has not grown substantially, a sign that the supply of available workers is tight, even though the US is still short of 3.6 million jobs from pre-pandemic levels. Goodspeed said business investment has also declined since the pandemic, making it difficult to increase supply in the economy.
“It’s difficult for me to see how supply syncs up with demand in 2022,” he said.