The May jobs report delivered an upside surprise Friday for the labor market and the strength of the U.S. economy as payrolls increased by 272,000 and wage growth ticked upward, reversing a three-month downward trend.
But the news is double-edged for the Biden administration as low unemployment and strong jobs gains have not been translating into positive sentiment on the economy for voters amid elevated prices and a crunch on the housing market.
Hopes for an upswing in the national economic mood have been hanging in part on the timing of interest rate cuts from the Federal Reserve, which could please investors and stimulate the economy.
But the Friday jobs report leaves that timing in limbo ahead of next week’s meeting of the Fed’s rate setting committee, along with any potential victory laps on the success of the economy’s soft landing.
“Heading into next week’s [Fed] meeting, robust job creation and firmer wage growth will likely reinforce policymaker’s backward-looking hawkish bias,” EY economist Lydia Boussour wrote in a commentary Friday. “The risks of a delayed onset [of the easing cycle] in September are growing.”
Even within the strong jobs report itself, marked discrepancies between the Labor Department’s household and establishment surveys — the data sources for the monthly jobs report — could indicate that conditions for workers are not as strong as they appear to be.
While the establishment survey of employers reported 272,000 new payrolls in May, the household survey showed that the number of employed people in the economy dropped by 408,000.
Other factors beside employment, such as the number of people retiring and response rates to the surveys themselves, are at play in such disparities, but they’re still of note to economists paying attention to the national mood.
“I think the divergence between the employer survey and the worker survey goes a long way to explaining this ‘vibecession’ – while the economy looks good on paper, real people are still not entirely feeling it,” Michele Evermore, a former Biden Department of Labor official, wrote in an analysis.
The weakness in the household survey could be due to the more volatile employment readings among young adults, Economic Policy Institute economist Elise Gould noted, a reading she described as “likely a blip” associated with summer seasonal factor adjustments.
Despite the mixed implications of the May jobs report, the Biden administration and fellow Democrats are focusing on the strength of Friday’s top-line numbers and the longer term trends in employment growth that they extend.
“On my watch, 15.6 million more Americans have the dignity and respect that comes with a job. Unemployment has been at or below 4 percent for 30 months – the longest stretch in 50 years,” President Biden said in a Friday release.
Top House Ways and Means Committee Democrat Richard Neal (Mass.) also cheered the report on, noting its “objectively strong” features.
“How many months of consecutive job growth will it take for Republicans to stop rooting against an objectively strong economy? After 40, one would think they’d finally recognize our record-breaking success, built for workers, and powered by workers,” he said in a statement.
While objectively strong job gains may be working in Democrats’ favor, it’s the subjectivity of how people are feeling about the economy that could have the most impact for the election.
For the 2022 midterm elections, the economy was the top issue for both Democrats and Republicans, with 8 in 10 registered voters ranking economic conditions as a “very important” factor in whom they chose to vote for, according to polling agency Pew Research Center.
Economic issues including inflation, health care costs and the deficit are all top concerns ahead of the current election, according to a May poll from the agency. Notably, unemployment is the lowest ranking issue listed in that poll, with near agreement on its level of importance between Democrats and Republicans.
While voters’ opinions of Biden’s handling of the economy have also proved lackluster in recent months, public opinion on the economy in general has improved since its low point in 2022 when less than 10 percent of Republicans and less than 30 percent of Democrats thought conditions were either “excellent” or “good.”
Persistent concerns about inflation have led the Biden administration to launch a multifaceted campaign against price-gouging in the private sector, which played a significant role in the post-pandemic inflation as companies capitalized on a glut fiscal and monetary stimulus to widen margins to record levels.
The initiative has spanned reports from the Federal Trade Commission calling out unusually high profits in the grocery sector to lawsuits from the Department of Justice’s long-dormant antitrust division against high-profile companies like Ticketmaster.
While the moves may elicit some compassion from voters on the state of higher prices while potentially deterring companies from further price hikes, there’s little indication that all the bluster will help to bring down prices within a time frame that matters for the election.
“We’re actually at a pretty good point as far as the normal monetary policy tools go, so I think that looking to antitrust, while it may make sense politically — I’m skeptical of it as an economist,” University of Central Arkansas economist Jeremy Horpedahl told The Hill.