Joe Biden’s Vulnerable Economy
The article discusses the current state of the U.S. economy under President Joe Biden, highlighting a mix of seemingly positive indicators alongside underlying economic challenges. While superficial metrics such as a low unemployment rate at 4%, record-setting indices like the S&P 500 and NASDAQ, and a modest deceleration in inflation (3.3% in May 2024) suggest economic stability, deeper issues present a bleaker picture.
The May 2024 jobs report paints a concerning scenario, with job creation dominated by government positions and lower-paying healthcare roles, hinting at a stagnant private sector. The workforce shrank by 250,000 people, and the labor force participation rate dipped to 62.5%, indicating a decline in active job-seekers. Additionally, full-time employment dropped significantly, while part-time positions increased, signaling potential economic insecurity for many Americans.
The inflation rate, primarily driven by escalating housing costs, remains high with a notable increase in prices since Biden took office. This persistent inflation, combined with soaring interest rates, is considerably impacting home affordability and ownership costs. Homeownership expenses, such as property taxes, maintenance, and utilities, have risen sharply. Mortgage rates stand around 7% for a thirty-year fixed-rate loan, making home buying increasingly unattainable, particularly for young and working-class Americans. Furthermore, costs associated with other necessities like auto insurance have also spiked, placing additional financial pressures on consumers.
although certain economic indicators appear strong, the underlying data reveals significant challenges facing the current economy, affecting the financial stability and prospects of many Americans.
Joe Biden’s economy, much like Joe Biden, continues to show confusion about where it wants to go.
On the surface, the economy seems to be doing great. Unemployment is relatively low at 4%, the S&P 500 and NASDAQ have recently set new records, and the growth of the inflation rate seems to have slowed, given the May Consumer Price Index coming in at 3.3% year-over-year.
However, scratch below the surface, and the economy is on very shaky footing.
The May jobs report was an unmitigated disaster. The U.S. economy added 272,000 jobs in May 2024. That seems like good news. But it isn’t, once you get below the headline numbers.
The overall number of people in the workforce shrank by 250,000 in May and the overall labor force participation rate fell to 62.5%, meaning fewer people are actively looking for work.
The largest employment gains came from government jobs and low-paying jobs in the healthcare system. The government sector has been one of the major contributors to job growth under President Biden. This is not a good sign for the private economy, as the government should be shrinking, not growing.
What is worse is that full-time workers declined by 625,000, while those holding part-time positions increased by 286,000.
In addition, in May, 414,000 immigrants, both legal and illegal, gained jobs, while 663,000 native-born Americans lost jobs. This may be why wage growth continues to be low, with immigrants taking low-paying jobs, suppressing the overall wage rate.
The Consumer Price Index, the measure of inflation in the United States rose 3.3% in May 2024, slightly less than April’s increase of 3.4%, driven primarily by the cost of housing. While the slowing of the rate price increases is welcome, prices are still up more than 7.5% over the past two years and, overall, prices are up nearly 20% since Joe Biden took office in January 2021.
The cumulative impact of inflation, combined with high interest rates, is putting the dream of home ownership further out of reach for most young and working-class Americans.
Not only are homes at record high prices, with the median home price over $400,000, the cost of maintaining a home has risen dramatically.
A recent study by Bankrate aggregated the average costs of property taxes, insurance, home maintenance costs, and utilities, finding that maintaining the typical home costs more than $18,000 per year, for a typical home valued at $436,000. This is an additional $1,510 per month on top of the monthly mortgage payment, up 26% over the past four years.
Homeowners’ insurance rates are up nearly 40% since 2019.
Add this to the fact that mortgage rates are hovering around 7%, for a thirty-year fixed-rate mortgage.
It is no wonder that the demographics of those living at home with their parents has changed. Mom and Dad’s basement is no longer reserved for the unemployed slacker who spends his days playing video games, eating frozen pizza, and drinking energy drinks. Today, it is college graduates who are moving home, with 32% of college graduates returning to their childhood bedrooms in an effort to save money for an apartment or a house.
It isn’t just home insurance. Auto insurance rates are also up nearly 23% over the past twelve months. In addition, the interest rates needed to finance the purchase of a car continue to be extremely high, ranging from 7 – 15%, depending on one’s credit score, and they are not expected to decrease in 2024.
While the headlines sound great — low unemployment, a booming stock market, and a declining rate of inflation growth — the economy is, quite frankly, simply limping along. More importantly, working Americans are struggling to make ends meet.
Real spending, which excludes inflation, fell in April 2024, with the American consumer spending less on cars, dining out, and recreational activities.
The Federal Reserve Bank’s decision on June 12 to leave interest rates at their current levels shows that the Fed is more concerned with the return of high inflation than about a slowing economy.
The Fed will be under tremendous pressure to decrease interest rates after their September meeting, in order to help Joe Biden’s reelection campaign. Will Jerome Powell and the rest of the Fed’s Board of Governors have the courage to remain neutral or will they bow to the power of political pressure?
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Jim Nelles is a Navy veteran and supply chain consultant based in Chicago. His articles have appeared in the Washington Examiner, Newsweek, Foxnews.com, and the Daily Wire. He has served as a chief procurement officer, chief supply chain officer, and chief operations officer for multiple companies.
The views expressed in this piece are those of the author and do not necessarily represent those of The Daily Wire.
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