May jobs report to land at pivotal moment in Biden agenda

The May jobs report on Friday morning is set to come at a crucial moment for President Biden’s economic agenda.

A disappointing April gain of 266,000 jobs and higher than expected inflation data this month has fueled criticism from Republicans over Biden’s handling of the economy. With the GOP eager to land a blow against Biden’s sturdy approval ratings, Republicans have seized on the fits and starts of the post-pandemic recovery to derail his massive spending plans.

Biden and Democrats are hopeful that a strong May jobs report can help vindicate their calls for patience of April’s undershoot and clear the path to eventual infrastructure package, with or without Republican support. But another weak jobs gain could spur more backlash and undercut Biden’s spending push as a backlog of other legislative priorities threatens to dominate the congressional calendar.

The consensus among economists is for a gain of 500,000 jobs in May, though many say what lies beneath that headline number is arguably more important.

“It’s going to be a big number by ordinary standards almost regardless. Even the disappointing April number was a pretty big number,” said Douglas Holtz-Eakin, president of the American Action Forum, a right-leaning think tank, and former director of the Congressional Budget Office.

The U.S. is still down more than 8 million jobs from February 2020 and more than 10 million when accounting for the jobs the economy would have likely created had the country stayed on its pre-pandemic trend.

Holtz-Eakin added that continuing improvement in labor force participation, more workers moving from part-time to full-time work, and recovery in hard-hit sectors would all help boost the overall employment gain and the economy’s long-term prospects.

“What I’d like to see is strength across the board, some additional pickup in the service sector but also in the goods sector. And if you get all of those, you’ll get a big number,” he said.

But while the May jobs report could shed light on how the labor market is recovering, it won’t be enough on its own to clear up some of the biggest questions shaping the partisan debate. 

More than 20 Republicans governors have pulled their states out of expanded unemployment insurance extended by Biden through the March stimulus bill, arguing that the additional benefits are causing labor shortages and keeping potential workers on the sidelines. Several Republican lawmakers have introduced measures to cut the benefits before they are set to expire in September, none of which will make it to Biden’s desk given the Democratic majorities in Congress.

Democrats have defended the additional benefits as crucial help for those unable to return to work and struggling with the financial burdens of the pandemic. Most liberal lawmakers and policymakers pin the labor shortages on health concerns and a lack of child care options, not a financial disincentive from unemployment aid.

“Of course, a lot of us are now vaccinated and can relax a little bit, but vaccination rates are still not fully where they could be,” said Molly Kinder, a fellow with the Brookings Institution’s Metropolitan Policy Program.

“A lot of people still live in households with family members who have underlying health conditions, and there’s still some vaccine concerns — people still have some hesitancy — so, I think the continued fear of the virus is a really important barrier,” she added.

Nick Bunker, economic research director at Indeed Hiring Lab, added that he has not yet seen “any good evidence or analysis” to show how the current level of jobless benefits has affected employment. He added that while job search activity on Indeed rose in states where governors announced plans to curb benefits, the increase was only “modest and temporary.”

Even so, Bunker said it will take more than just the May jobs report to untangle the different forces affecting the labor market.

“I think we’re going to need more time and more data to get a real answer here,” he said.

But there isn’t much time to spare in Washington.

Biden has set a self-imposed August deadline to pass an infrastructure bill, giving Democrats little time to coalesce around a partisan bill if negotiations don’t produce a viable bipartisan measure.

The May jobs report could be the last major economic indicator released before Biden and Democrats must decide whether to stick with negotiations or go it alone to push another multitrillion-dollar spending bill through budget reconciliation.

While Biden has expressed interest in working through partisan tensions, he’s shown no willingness to heed Republican concerns about the impact of his agenda. During a Friday press conference, Biden waved off GOP criticisms that he wasn’t doing enough to push workers into available jobs and maintain pressure on businesses to boost wages.

“We want to get something economists call full employment, where instead of workers competing with each other for jobs that are scarce, we want employers to compete to attract workers,” Biden said. “We have more than ample room to raise worker pay without raising customer prices.”