The Biden admin is desperate to turn things around. But they’ve got another thing coming.
Because this October surprise has hit Joe Biden right where it hurts the most.
Since the Federal Reserve is keeping interest rates high in an effort to bring down inflation, the labor market has slowed down, adding only 150,000 jobs in October.
Employment data released by the Bureau of Labor Statistics on Friday showed job growth that was lower than most experts had predicted. It was also significantly lower than the revised growth of 297,000 jobs in September. The revised numbers for August’s job growth bring the total for the two months to 101,000 lower than had been estimated.
There was a 0.1 percentage point rise in the unemployment rate, which now stands at 3.9%.
This slowdown will make it more difficult for the White House to credit President Joe Biden for robust job growth over the past year, which has been a priority for the administration.
“With less heat seen in the job market, this report should go over well at the Federal Reserve, which has been keeping the threat of a rate increase alive even as it has opted not to pull the interest rate raising lever at the past two meetings,” Bankrate’s senior financial analyst Mark Hamrick said about the news.
According to a survey of households conducted for the employment report, the total number of unemployed remained unchanged at 6.5 million.
In October, both the employment-population ratio and the labor force participation rate decreased by 0.1 percentage points, bringing them down to 62.7% and 60.2%, respectively.
The United Auto Workers strike may have had some effect on the job report for the month of October. Beginning in September, the UAW strike spread to more than 45,000 workers across multiple plants in over two dozen states, all employed by the “Big Three” automakers.
Researchers at Goldman Sachs believe that the strikes reduced the October employment report by 30,000 people. The UAW is now close to finalizing deals with Ford, Stellantis, and GM.
In reaction to the hyperinflation that has ripped through consumers over the past few years, the Fed has undertaken a historic effort to constrain monetary policy. Annual inflation, as assessed by the consumer price index, decreased from over nine percent in June 2022 to a more digestible 3.7% in September.
However, the central bank’s aim for long-term inflation is 2%, so the Fed may have to maintain its severe monetary policy for some time. The Fed’s preferred measure, the consumer price index, showed annual price growth of 3.4% in September. This report was released last week.
The current goal range from the Federal Reserve is 5.25 percent to 5.5 percent, the highest in years. Raising interest rates has the intended consequence of discouraging people from taking out loans and investing. In the opinion of many economists, a rate-hike cycle will inevitably result in a recession.
There are further negative repercussions on consumers from the rising federal funds rate.
High interest rates have increased the cost of getting a car loan and made it more difficult to accrue and repay credit card debt. In addition, it has harmed people’s ability to afford homes because of rising mortgage rates and skyrocketing home prices.
According to Mortgage News Daily, which reports daily changes in mortgage rates, the average rate for a 30-year, fixed-rate mortgage was 7.51% as of Wednesday. Last month, mortgage rates climbed above 8% for the very first time since the beginning of the twenty first century.
But despite the rate hikes, GDP growth has remained strong, which is some good news for the economy.
Surprisingly robust growth given the recent increase in interest rates was announced by the Bureau of Economic Analysis for the third quarter of this year: 4.9% on an annualized basis, up from 2.1% in the previous quarter.
All in all, though, this news is troubling for Joe Biden and the Democrats who are up against it as the 2024 election is now just a year away. Reports show that a vast majority of Americans do not trust the Biden administration with the future of the economy.
The sentiment Americans have for the existing administration’s handling of the economy is always the best indicator of how the incumbent party in power will do in the next major election cycle. If that rings true for 2024, the Democrats may be kissing control of the White House and the U.S. Senate goodbye.
Stay tuned to the DC Daily Journal.