Reviews |  Biden is right to be cautiously optimistic about the economy

Reviews | Biden is right to be cautiously optimistic about the economy


President Biden still faces the threat of a recession. He has no assurance that Republicans will refrain from forcing the US Treasury to default on debt over the next two years. For now, however, he can take comfort in a recent string of good economic news.

Most important was the dog that didn’t bark. Or more precisely, the railway strike which will not take place. In a painful but responsible separation from organized labor, the White House introduced a bipartisan deal in Congress to force through the final labor agreement between the railroads and unions, averting a crippling work stoppage this month. .

Although Republicans rejected a proposal to increase the number of sick days for railroad workers from one day to seven, the Senate, by an 80-15 vote, ended fears of a strike that could have put hundreds of thousands out of work and brought the holiday shopping season to a screeching halt. Among Democrats, only Senator Joe Manchin III of West Virginia voted against including sick days in the collective bargaining agreement; all but six Republicans opposed the legislation.

Biden welcomed the passing of the deal on Thursday. “Decisive congressional action ensures that we avert impending and devastating economic consequences for workers, families and communities across the country,” he said.

This news came shortly after the Bureau of Economic Analysis reported that personal consumption spending rose 0.8% in October. Meanwhile, third-quarter growth came in better than expected at 2.9%. If we’re looking for steady, sustainable growth, that number fits the bill.

And despite these growth figures, inflation has come down somewhat. The Wall Street Journal reported: “The Personal Consumption Expenditures Price Index rose 6% in October from the same month a year ago, marking a decline from 6.3% in September.” Excluding volatile food and energy costs, core inflation rose 5% in October from a year ago.

This helps explain why Federal Reserve Chairman Jerome H. Powell said earlier in the week, “It makes sense to moderate the pace of our rate increases as we approach the level of restriction that will be sufficient to lower inflation. The time to moderate the pace of rate hikes could come as early as the December meeting. »

To top it off, gasoline prices continued to plunge, largely due to a drop in global demand. The average price per gallon is now lower than it was at the start of the war in Ukraine. This, too, will help keep money in consumers’ pockets even as they embark on their holiday shopping.

Biden issued a statement of moderate optimism on Thursday: “We are seeing the first signs that we are making progress in tackling inflation, even as we transition to more steady and stable economic growth.” He added: “It will take time to get inflation back to normal – and there could be setbacks along the way – but the American people should have confidence that our plan to fight inflation, without giving up on all the historic economic gains American workers have made, works.”

Finally, the week ended with a positive jobs report for November. The economy created 263,000 jobs, keeping the unemployment rate at 3.7%. Despite layoffs in the tech industry, job growth remained remarkably robust and wages rose 0.6%.

The White House’s cautious positivity approach is wise. The under-promise and over-performance mantra has worked for Biden before. The majority of outside economists and business leaders expressed certainty that a recession is imminent. Didn’t a recession follow virtually every effort to curb inflation by raising interest rates? Yes, but it is also possible that the economy is on the way to a soft landing and a return to normal inflation and economic growth.

While economic fortunes may yet turn for the worst, Biden’s economic performance certainly looks likely to deliver strong results in stark contrast to the rest of the world. Biden, quite simply, could not have asked for a better set of economic news to end the year.

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