Labor pains
One of the most perplexing aspects of the U.S. economy is that employers have been on an almost non-stop hiring spree since President Biden took office — and analysts see no sign of the trend reversing anytime soon.
The irony is that there’s no guarantee that the job boom will keep Biden in the White House beyond November, completely confounding the saying “It’s the economy, stupid” that wins elections.
For 39 straight months, employers have added jobs despite many predictions that the United States was headed for a recession. They also faced a long list of challenges that have plagued many of America’s peers, including high inflation and interest rates. wars in Ukraine and Gaza that have sent energy prices soaring. and shipping turmoil in the Panama Canal, the Red Sea, and now the Port of Baltimore.
March was another blockbuster for jobs. The latest data released on Friday beat analysts’ expectations by a huge margin, with employers adding 303,000 jobs. That brings the tally over the past 12 months to more than 2.8 million hires – and economists expect the upward trend to continue. “We think there’s still room for growth” next year, Jeremy Schwartz, senior U.S. economist at Nomura, told DealBook.
It is less certain whether Biden will be able to exploit this in his race against Donald Trump. The White House heralded the latest numbers as a “landmark in America’s comeback” and held it up as evidence that the Deflation Act and the CHIPS Act, two elements of Biden’s agenda, are growing the economy.
But the hot labor market could just as easily exacerbate two of Biden’s big vulnerabilities: inflation, with strong wages fueling spending growth that raises prices on everything from gas to concert tickets. and higher for a higher interest rate to offset these price increases. A growing chorus of Wall Street analysts predicted the Fed would be in no rush to cut borrowing costs after yesterday’s report.
(By yesterday’s market close, traders had pushed back their predictions for the Fed’s first rate cut in July rather than June.)
Biden’s poll numbers are approaching those of many one-term presidents. Voters say they disapprove of his handling of the economy, even though he presides over, by many indicators, a global winner. “When it comes to the economy, shocks are at war with facts, and shocks are winning,” the Wall Street Journal’s Greg Ip wrote this week.
Some doubters are beginning to change their tune. Yesterday’s jobs report “calls into question our case for the economy,” Thomas Simons, an economist at Jefferies who had predicted the United States would fall into recession this year, wrote in an investor note. Mohamed El-Erian, an economist and consultant at Allianz, had a similar conversion. He told Bloomberg TV that the latest jobs numbers “confirm the economic exceptionalism of the US.”
There is still a lot of bad economic news. Americans (young and old) are worried about their retirement savings. They’ve also racked up credit card debt and their savings are dwindling.
But the labor market remains a bright spot. Wages are rising, as is the labor force participation rate, which rose from 62.5 percent to 62.7 percent as 469,000 people joined the labor force last month. The post-pandemic economic recovery has led to big gains across race and income disparities, Schwartz said.
Nomura tracks a specific metric to gauge an incumbent’s chances: the “misery index.” It’s a simple calculation that adds the inflation rate to the unemployment rate. Presidents with a higher impoverishment index number tend to lose their re-election bids.
Biden’s discomfort rating has remained relatively high throughout his presidency. But that number has fallen in line with the rate of inflation, and the latest jobs report is expected to lower it further.
The question is whether Biden’s unhappiness index will drop enough to put him in the range of Ronald Reagan and Barack Obama, who rode slow economic recoveries in their first terms to win again — or whether he’ll stay closer to President George W. Bush, who lost Round 2 in 1992?
In other words, will voters give Biden credit for jobs or blame him for inflation?
IN CASE YOU MISSED IT
Bob Iger and Disney won a proxy fight against Nelson Peltz. The entertainment giant’s shareholders rejected the financier’s attempts to win board seats for the second time in two years. The win ends an expensive race that has distracted the company as it faces major challenges, including revamping ESPN, spending billions to update its theme parks and figuring out the future of Hulu.
Tesla sales fireball. Elon Musk’s electric vehicle company reported its first quarterly sales decline since 2020 and warned of “significantly lower” growth this year. Tesla’s results reflected a broader slowdown in the EV market, but some prominent investors also blamed Musk’s “toxic behavior” for the brand’s demise. Tesla stock has fallen more than 30 percent this year.
Endeavor plans to go private as part of a deal with Silver Lake. Ari Emanuel’s company, which owns talent agencies IMG and WME, will cease to operate as a publicly traded entity three years after going public. Silver Lake will buy the Endeavor stock it doesn’t already own in a deal that values Endeavor at about $13 billion. The company failed to achieve its ambitious plans to become a media powerhouse that produced content as well as representing top stars such as Dwayne Johnson and Oprah Winfrey.
Microsoft splits Teams from Office as regulatory scrutiny intensifies. The tech giant will separate its video and document collaboration program from its suite of business software after rivals including Slack and Zoom complained that their bundling was anti-competitive. US and European regulators have stepped up their investigations into Microsoft following a series of deals in recent months, including the company’s investments in artificial intelligence startups such as OpenAI and Mistral.
On our radar: ‘Face-Off: US vs. China’
The United States and China have sought to stabilize their relationship in recent months, but the underlying tensions between the world’s two largest economies are not likely to end anytime soon. Treasury Secretary Janet Yellen criticized Beijing on a trip to China in recent days, accusing it of “coercive actions against American companies” and warning that state-backed manufacturers are distorting global markets.
The sharp rhetoric comes days after the executives paraded with China’s president Xi Jinping – a sign they want to remain engaged there despite apparent challenges.
“Face-Off: The US vs China” is an eight-part podcast starting Tuesday that tries to explain the relationship and why the stakes are so great. The series is hosted by Jane Perlage, a former New York Times Beijing bureau chief who is now at Harvard’s Kennedy School, and features a leading historian, Rana Miter. Perlez told DealBook that the goal was to give listeners “a rational approach” to understanding one of America’s biggest challenges.
Perlez and Mitter discuss everything from Apple’s remarkable rise in China and the future of Taiwan to Chinese espionage and Biden and Xi’s personal relationship, and interview diplomats, spies, technical and military experts – even and Yo-Yo Ma.
