Michelle ThompsonFollowing President Joe Biden’s withdrawal from the presidential race, he has paved the way for a new Democratic candidate to address the nation’s economic recovery after the pandemic.
Biden’s announcement on X Sunday afternoon highlighted his administration’s economic successes. He claimed, “Today, America has the strongest economy in the world,” and noted, “we overcame … the worst economic crisis since the Great Depression.”
Although the economic situation looks somewhat better than what Biden encountered in 2021, it remains complicated. The new Democratic candidate will need to navigate a challenging economic landscape leading up to the November election.
Employment has remained stable throughout this year.
The labor market has remained reassuringly stable, although job growth slowed slightly last month. In June, the US economy added 206,000 jobs, down from 215,000 in May, according to the Bureau of Labor Statistics report on July 5.
The economy remains robust historically. June marked the 42nd consecutive month of job growth, making it the fifth-longest employment expansion on record.
The unemployment rate edged up by 0.1 percentage points to 4.1%, the first time since November 2021 it surpassed 4% and the third consecutive month of increases.
Although job opportunities are still above pre-pandemic levels, they have decreased, and Americans are experiencing longer periods of unemployment. The median duration of unemployment increased to 9.8 weeks from 8.9 weeks, a level not seen since January 2023, according to BLS data.
While economists are not overly concerned about the current unemployment rate, further increases as the election approaches could raise some alarms.
Interest rates have remained high.
The June jobs report also revealed a slowdown in wage growth, with average hourly earnings rising by 0.3% for the month and an annual increase of 3.9%, the lowest in three years.
This deceleration in wages could pave the way for the Federal Reserve to start lowering interest rates, provided it leads to reduced inflation. Although strong wage growth can drive up prices, Fed officials primarily monitor inflation indicators to assess whether price increases are under control.
The Fed initiated a vigorous rate-hike campaign in March 2022 to prevent a looming recession amid post-pandemic inflation. Despite the increased likelihood of a “soft landing”—where inflation is controlled without triggering a recession or significant unemployment—the Fed has been reluctant to cut interest rates.
Following their June meeting, the central bank announced it would maintain its benchmark lending rate at its current level for the seventh consecutive time, sustaining a 23-year high since last August.
These historically high rates have significantly impacted Americans’ cost of living, affecting everything from mortgage rates to car loans. While average rates for the standard 30-year fixed-rate mortgage have decreased this year, they still remain above 6%. Borrowing costs are expected to ease by the end of the year, but the reduction may be minimal.
Inflation is showing tentative signs of improvement.
Alongside interest rates, inflation has been a significant financial concern for Americans during Biden’s term, driven by pandemic-era disruptions to global supply chains and price gouging by retailers, which have pushed prices up since 2021.
Inflation rates are far from the pandemic peak of June 2022, when U.S. inflation reached 9.1%, the highest annual rate in over 40 years. As of last month, annual inflation was at 3%, down from 3.3% in May, according to the Consumer Price Index.
Declining gas prices and reduced prices for new and used cars contributed to the first month-on-month decrease since May 2020, as reported by BLS data. Annually, consumer prices are rising at their slowest rate since June 2023, matching the lowest annual rate since early 2021.
Despite this improvement, it might take time for these positive trends to significantly impact consumer wallets, as living expenses remain high for many people who have struggled with elevated prices over the past three years.
The Fed will likely want to observe a more consistent pattern of declining inflation and clearer evidence that inflation is moving toward the bank’s 2% target before considering lowering interest rates.
Domestic manufacturing jobs have been a focal point for economic policy and workforce development.
A key initiative of the Biden administration, the bipartisan CHIPS and Science Act, was enacted in July 2022 to encourage companies to restore semiconductor chip manufacturing in the U.S., aiming to reduce costs and avoid supply chain issues.
Once a global leader in semiconductor production, the U.S. has fallen behind as countries like China increased their output, leading many American manufacturers to rely on imported chips, which are crucial for making cars, smartphones, and medical devices.
Since the bill’s passage, the administration has invested billions in research, development, and manufacturing across several states, including Arizona, Colorado, New Mexico, Oregon, and Texas.
In April, the White House reported that companies have pledged over $825 billion in investments in U.S. manufacturing and clean energy, including semiconductors, since the President took office.
The new Democratic nominee might highlight the CHIPS and Science Act as a testament to the party’s dedication to boosting domestic employment. However, the legislation arrives at a time when some manufacturing jobs have been lost to outsourcing.
Overall, manufacturing employment has stabilized at around 13 million after recovering from a significant drop during the pandemic in 2020, according to Bureau of Labor Statistics data. Notably, jobs in machinery manufacturing, which includes agriculture and construction equipment, have decreased by approximately 9,000 since the start of the year.
