Biden administration headache Inflation and low employment become bottlenecks in the U.S. economy

At present, all walks of life are worried about the inflation of the U.S. economy is intensifying, at the same time, the U.S. society also appeared during the epidemic welfare and employment sluggish parallel situation, which has become the most headache of the Biden administration.

The U.S. unemployment rate, CPI and PPI data for April have hit some bumps in the road, dampening consumer confidence, and the industry has pointed out that the problem facing U.S. employment is that unemployment benefits are higher than wages at work, which is one of the reasons for encouraging continued unemployment. At the same time, conservatives oppose the Biden administration’s trillion-dollar plan to transform America and say these practices are causing economic instability.

Cecilia Rouse, chairwoman of the White House Council of Economic Advisers, told reporters on Friday (May 14) that the recent price hike was a “mismatch between supply and demand” caused by the pandemic and the rebounding economy, but that the situation should be temporary.

I fully expect this to resolve itself in the coming months,” she said.

The Fed also said inflation will cool off on its own after the end of the year, and it thinks hiring will pick up in the summer and Americans will start traveling again, which is what would happen if the Fed kept interest rates low.

The White House won’t provide a timetable for when the economy will plateau. But it said April’s weak jobs report would not be repeated.

“The trend line continues to be positive,” a senior White House official told Reuters. He said the White House also believes the Fed can handle problems as they arise. “We haven’t seen any indication that the Fed doesn’t have sufficient tools to manage any risks that may arise.”

Businesses are protesting

But is the White House being too optimistic? Reuters notes that more turmoil could be foreseen in the coming months.

With Biden’s trillion-dollar economic plan based on tax hikes on the wealthy and corporations, business confidence in investment could be depressed and could greatly hamper the recovery of non-essential industries.

Speaking to reporters outside the White House, House Republican Leader Kevin McCarthy said he was concerned about inflation and gasoline prices, saying, “There’s not going to be any Republicans who want to go out and raise taxes, and I think that’s the worst thing you can do in this economy.”

The powerful corporate lobby, the U.S. Chamber of Commerce, is also pushing to repeal the special unemployment payments that Biden made a cornerstone of his campaign, and governors in more than a dozen states have decided to roll them back early. Because it amounts to discouraging people from working.

With 7.5 million more people out of work or out of the job market altogether than before the pandemic, another month or two of weaker-than-expected job growth and rising prices could add to the pressure on Biden and the Fed.

Gregory Daco, chief U.S. economist at the Oxford Economics Institute, said, “If we have another April number, that’s a concern.”

But some early data have suggested that the May jobs report could also be weak.

If workers aren’t looking for work for some reason (persistent fear of illness, lack of child care, and higher-than-usual unemployment benefits are all condemned reasons) puts a damper on the employment picture, Dacko said. Then, he says, “the question is how do you get people to come back? And that’s a different question than injecting stimulus into the economy anymore.”

The Biden administration, workers, labor advocates and some economists argue that companies should raise wages if they are having trouble hiring, and some, including McDonald’s, have already followed suit. But as soon as wages are raised, it means higher costs, which automatically results in higher prices for goods and could generate inflation.

Federal Reserve officials admit that things can be tricky. Richmond Federal Reserve (Richmond Federal Reserve) Chairman Thomas Barkin (Thomas Barkin) said, “The question of how to unclog the labor market will be a key issue that, if it takes too long, could limit overall economic growth this year.”

Another bottleneck – rising prices

In addition to the challenge of “untangling” the labor market, there is another challenge of stifling the explosion of prices as Americans return to school and the office and go on vacation again.

Consumer sentiment plunged in early May as people worried about rising commodity prices. Inflation expectations for the next year and the next five years have risen to the highest in more than a decade.

Natural gas pipelines in some southern states were shut down due to a hack that was unrelated to the pandemic and lifted, but the situation eventually took “some time” to return to normal, leading to a short-term increase in gas prices in several states.

Economic data for April showed that car prices are also rising, and the shortage of semiconductors that began before Biden took office continues to drive up car prices, and Americans who fear pandemics are looking for alternatives to public transportation.

Homebuilders point to soaring lumber prices as well, which they say have threatened the critical housing market and the broader economy. Ken Simonson, chief economist for the Associated General Contractors of America, said the price of materials for construction jumped 19.7 percent from April 2020 to last month, the largest increase in 35 years of history.

The White House declined to elaborate on specific remedies it might take to help the supply side of the economy.

“Defying inflation” has been a terrible failure

President Carter and his predecessor, Republican President Ford, found inflation impossible to defeat, but faced more endemic problems in the 1970s.

History proves that Ford’s Inflation Defying (WIN) program, which he promoted to encourage Americans to save more and spend less, was a terrible failure.

The gas pipeline at the time was the result of entrenched geopolitics, not a one-time hacking crisis. Inflation was much higher then, and was generated by a nationwide psychological effect that prices and wages should keep rising – an important distinction that Fed officials insist will not be allowed to happen again.

During the Carter years, the U.S. actually added an average of 215,000 jobs a month. Yet unemployment is rising as more new workers join the workforce, thanks to demographic trends and more women working outside the home for the first time.

And Biden faces a very different problem – a job market in the wake of a deadly pandemic that has left workers restricted, strained, or temporarily living off savings and unemployment benefits. But that doesn’t mean jobs will be easier for the Biden administration.