How an adviser to Biden thinks about the job market and inflation

What are the biggest challenges of the presidency? Lael Brainard, the president, and why inflation is still an issue in the U.S.

Unemployment has been under 4% for more than a year, and has been at 3.7% for the last few weeks. Employers also added 199,000 jobs last month and wages keep rising. So why do so many Americans have a pessimistic view of the economy? Gallup’s recent economic confidence poll shows that nearly three quarters of Americans think the economy is getting worse.

National Economic Council Director Lael Brainard, whose job it is to advise President Joe Biden on economic policy, spoke to All Things Considered host Ari Shapiro on Friday about what the numbers show and why inflation is still an issue.

Ari Shapiro: When you look at this new data, unemployment is extremely low; wages are growing; job creation is strong. So what do you think are the biggest challenges right now? What’s the biggest problem you’re trying to solve?

Brainard: Well, I think that is a really notable feature. Again, if you think about some of the doom and gloom three years ago, people were talking about the Great Resignation, saying that women – particularly women with children – wouldn’t be rejoining the labor force. A rebound in labor force participation for women overall has not happened, but it has happened in prime working years of 25 to 54, and that is what we have seen. That also includes mothers with young children. And I think that is in part a reflection of really strong child care policies that the president put into effect to make sure that people would have access to childcare at a time when a lot of child care centers were facing challenges. Because of that, there is more flexibility in how many Americans are able to work right now.

Americans think the economy isn’t good despite the strong jobs market and rising wages. A majority of respondents told Gallup last month that they think the economy is getting worse, and that has been the case for almost every month of Biden’s time in office. How do you account for this discrepancy?

Brainard. While the jobs picture is very bright, we know there are many Americans who are concerned that some things might not be affordable. And that’s why the president is so focused on fighting to bring down costs for hard working Americans. For instance, the president believes it just isn’t right that prescription drugs are practically unaffordable for many Americans, and that’s why he’s fighting to lower health care costs. He got legislation to limit the cost ofinsulin for senior citizens at $35 a month. That’s down for $400 for many. You know, we also are capping out-of-pocket drug costs for seniors at $2,000 per year. And Medicare has the authority now to negotiate prices, starting with 10 drugs next year.

This is Shapiro: Do you think the economy is getting worse because of price of drugs? Three quarters of Americans tell Gallup the economy is getting worse. I think the answer comes from a sentiment larger than the question, and that appears to be the case.

Brainard: Well, actually, this morning we saw a really big jump up in consumer sentiment in the Michigan survey. Consumers are focused on the costs that matter most to them. Health care is a huge affordability issue for so many Americans. Consumers are tired of being hit by hidden fees. Junk fees, such as airline tickets, credit cards, and overdraft fees, are being cracked down on. Corporations need to be passing on the savings from their supply chains and input costs to consumers now that they have fixed supply chains. And we think that will go a long way to continuing that increase in consumer sentiment that we saw today.

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Friday’s strong jobs report exceeded expectations. Unemployment dropped to 3.7% last month as almost 200,000 jobs were created.

200 million people are shopping this year between Thanksgiving and Cyber Monday, higher than any other time in history, and spending at a record rate.

Inflation, which has led to higher grocery and gas bills than Americans would like, is partially to blame for souring their moods. But there’s more going on here.

In 2020 when Trump is in office, it went up to 81%. The positive view of the economy by Republicans was 10% less this year thanks to Biden in the White House.

For example, according to Pew, in 2016 when former President Obama, a Democrat, was in office, just 18% of Republicans thought the economy was either good or excellent.

Unemployment was 4.7% when Obama left office, but the economy was still recovering from the Great Recession. The unemployment rate dropped to 3.5% in February 2020, just before the swine flu epidemic, but it’s not much of a factor in why Republicans increased their numbers by 63 points.

One of the things people can see is inflation on large signs at gas stations and grocery stores. In June of last year overall inflation was at a high of 9.1%, up from 8.4% in the month before. But food inflation was an even higher 11.4% last summer.

That meant that things like steak, bacon, eggs, cheese, potato chips, coffee, ice cream and cookies were more expensive. All are household items and noticeable every time someone checks out at the store.

Overall inflation has fallen from 6.3% at the start of the year to 3.2% in October, while food inflation has gone from 10.1% to 3.3%.

A recent Gallup survey showed that the majority of Americans disapproved of Biden’s handling of the economy and the drop in food inflation hasn’t made much of a difference.

Housing costs in many parts of the country remain high, and one of the reasons for inflation coming down is because the Federal Reserve hiked interest rates substantially, making the ability to afford a home significantly more difficult.

Biden and his campaign team have to hope that inflation continues to recede, the Fed starts to lower rates, and people feel a loosening of the pinch on their wallets in an election year, because right now this issue makes Biden especially vulnerable for reelection.

Source: The economy is a trouble spot for Biden despite strong signs. Here’s why

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