On Tuesday, President Joe Biden’s Council of Economic Advisers published a blog post urging people not to overemphasize employment numbers in any given month. The message likely came ahead of the release of the expected monthly jobs report on Friday, to counter possible claims the government was seeking excuses for weak numbers. But the reported result was very strong. The economy created an impressive 850,000 new jobs in June.
The rise in employment has been particularly impressive given widespread claims that businesses could not grow because overly generous benefits for the unemployed discouraged workers from taking a job. (The recent benefit cuts in several states came too late to influence the June report.) Well, employers manage to hire a lot of people anyway.
Oh, and look how right Donald Trump was to warn that there would be a “Biden Depression” if he wasn’t re-elected.
That said, the statements of the council of economists made sense. Covid-19 has created huge upheavals in the economy, and as we recover from these upheavals, economic statistics are being affected by noise, in large part because of the standardized adjustments made by statisticians to normalize things like seasonal variations do not work well in an economy still distorted by the pandemic.
At this point, however, we have enough data to say that the economy is booming. The boom is so strong, in fact, that Republicans have reversed their position, going from declaring (falsely) that we know the worst job performance in decades to praising the jobs numbers, attributing them to … Trump in 2017 .
We’ll get to that in a minute. First, let’s try to put the boom in context by pointing out that the economy is warmer than the “morning in America” period that gave Ronald Reagan a landslide victory in the 1984 presidential election.
We have created three million jobs since taking over Biden, an average of 600,000 per month. This compares to the creation of 340,000 jobs a month before the 1984 election.
It’s fair to add that the jobs created in the Reagan era started from a lower base, so it would be fairer to compare growth rates. But that still gives Biden an advantage: annualized growth of 5%, up from 4.4% in 1983-84. And the disparity grows when we compare the employment growth figures to those of the working-age population, which grew by 1% per year in the 1980s but is stagnant today.
That is, we have a boom. What’s behind it?
Republican determination to attribute anything positive to tax cuts would be absurd even as a travesty. Some still remember how virtually everyone in the GOP predicted disaster when Bill Clinton raised taxes and, instead presiding over a period of immense prosperity, said the boom of the late 1990s was due to Reagan’s tax cuts early in the previous decade. . Of course, they now insist that the good news for mid-2021 is due to something Trump did almost four years ago.
The truth is, Reagan doesn’t even deserve much credit for the boom of 1983-1984; instead, most of the credit goes to the Federal Reserve (Fed), the central bank of the United States, which cut interest rates in 1982.
But how much credit for job growth in 2021 should Biden go? While that’s not all, the President certainly deserves a good chunk of it.
The American bailout plan, which strongly boosted the purchasing power of American consumers, has certainly been an important engine of growth. However, the rapid increase in the vaccination rate, which has led to a sharp drop in the number of infections and deaths, has been even more significant. Some of us predicted long ago that the United States would experience a rapid V-shaped recovery once the pandemic subsides and the economy can reopen. Well, the success of the vaccination campaign got us to this point.
And political leadership has a lot to do with rapid vaccination. Yes, the vaccines themselves were developed before Biden took over, and the Trump administration has ordered millions of doses. But the Biden administration has pushed much stronger measures than its predecessor to coordinate the distribution of vaccines and speed up their implementation.
More generally, anyone who doubts the importance of ongoing political leadership against Covid-19 should take into account the differences in vaccination rates between states, which are strongly correlated with party preferences: the states in which Biden won have had far more successful than those Trump has gained in promoting the vaccination of his residents.
So yes, we’re living a new morning in America, and Biden deserves more credit for it than Reagan does for what happened in his administration.
Of course, things can still go wrong. The pace of vaccinations has slowed, in part because of resistance in Republican states, and the large number of Americans still unvaccinated makes a new wave of contagion possible. Moreover, although I am one of those who consider current inflation to be transitory, it could be wrong.
Above all, short-term economic success is no guarantee of good long-term results. Many have forgotten the widespread economic desperation that prevailed just a few years before Reagan’s triumphalism.
But for now, the news on the economy is good. And Joe Biden has every right to brag about it.
Translation of Paulo Migliacci
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