Labor pains
One of the most confounding aspects of the U.S. economy is that employers have experienced a nearly uninterrupted hiring spree since President Biden took office — and analysts see no sign that the trend will reverse from so early.
The paradox is that there is no guarantee that the jobs boom will keep Biden in the White House beyond November, completely muddling the adage “It’s the economy, stupid” that wins elections .
For 39 straight months, employers have added jobs despite widespread predictions that the United States was doomed to a recession. They also faced a long list of challenges, which challenged many American peers, including high inflation and interest rates; the wars in Ukraine and Gaza that sent energy prices skyrocketing; and maritime turbines in the Panama Canal, the Red Sea and now the Port of Baltimore.
March was another employment blockbuster. The latest data released Friday far exceeded analysts’ expectations, with employers creating 303,000 jobs. That brings total hiring over the past 12 months to more than 2.8 million — and economists expect this upward trend to continue. “We think there is still room for growth” for next year, Jeremy Schwartz, senior U.S. economist at Nomura, told DealBook.
It is less certain that Biden will manage to take advantage of this in his race alongside Donald Trump. The White House announced the latest figures as follows: “an important step in America’s comeback“, and presented it as evidence that the Inflation Reduction Act and the CHIPS Act, two key elements of Biden’s agenda, were growing the economy.
But the hot job market could just as easily exacerbate two of Biden’s big vulnerabilities: inflation, with high wages fueling a surge in spending that drives up the prices of everything from gasoline to concert tickets; And higher interest rates for longer to counteract these price increases. A growing number of Wall Street analysts predicted that the Fed would be in no hurry to reduces borrowing costs after yesterday’s report.
(By market close yesterday, traders had pushed back their forecasts that the Fed’s first rate cut would come in July rather than June.)
Polling numbers for Biden are approaching those of many single-term presidents. Voters say they disapprove of his handling of the economy, even though he presides, by many indicators, to the world beater. “When it comes to the economy, the mood is at war with the facts, and the mood is winning,” the Wall Street Journal’s Greg Ip wrote this week.
Some skeptics are starting to change their minds. Yesterday’s jobs report ‘calls into question our case for the economy’ Thomas Simons, an economist at Jefferies, who predicted that the U.S. fall into recession this year, he wrote in a note to investors. Mohamed El-Erian, an economist and advisor at Allianz, made a similar conversion. He told Bloomberg TV that the latest jobs numbers “confirm American economic exceptionalism.”
There is still a lot of bad economic news. Americans (young and old) are concerned about their retirement savings. They also have debts accumulated on credit cardsand their savings are dwindling.
But the job market remains a positive point. Wages are rising, as is the labor force participation rate, which rose from 62.5 percent to 62.7 percent as 469,000 people joined the labor force last month. The post-pandemic economic recovery has led to broad progress across racial and income divides, Schwartz said.
Nomura monitors a particular metric to gauge an incumbent president’s chances: the “misery index.” It’s a simple calculation that adds the inflation rate to the unemployment rate. Presidents with a higher misery index tend to lose their reelection bids.
Biden’s level of distress has remained relatively high throughout his presidency. But that figure has fallen along with the inflation rate, and the latest jobs report is expected to reduce it further.
The question is whether Biden’s misery index will drop enough to put him in the range of Ronald Reagan and Barack Obama, who took advantage of a late economic recovery in their first terms to win again – or s he will get closer to President George HW Bush, who lost. Second round in 1992?
In other words, will voters give Biden credit for jobs, or blame him for inflation?
IN CASE YOU MISSED IT
Bob Iger and Disney won a proxy fight against Nelson Peltz. Shareholders of the entertainment giant have rejected the financier’s efforts to win board seats for the second time in two years. The victory ends a costly fight that distracted the company as it faces big challenges, including overhauling ESPN, spending billions to upgrade theme parks and determining the future of Hulu.
Tesla sales lead. Elon Musk’s electric vehicle company reported its first quarterly year-over-year sales decline since 2020 and warned of “significantly weaker” growth this year. Tesla’s results reflect a broader slowdown in the electric vehicle market, but some high-profile investors have also blamed Musk’s “toxic behavior” for damaging the brand. Tesla shares have fallen more than 30% this year.
Endeavor plans to go private in a deal with Silver Lake. Ari Emanuel’s company, owner of talent agencies IMG and WME, will cease operating as a listed entity three years after its IPO. Silver Lake will buy the shares of Endeavor it doesn’t already own in a deal that values Endeavor at about $13 billion. The company failed to realize its ambitious plans to become a media powerhouse producing content and representing big stars like Dwayne Johnson and Oprah Winfrey.
Microsoft separates Teams from Office as regulatory scrutiny intensifies. The tech giant will separate its video and document collaboration program from its enterprise software suite after competitors, including Slack and Zoom, complained that their bundling was anti-competitive. U.S. and European regulators have stepped up their investigations into Microsoft after a series of deals in recent months, including the company’s investments in AI start-ups such as OpenAI and Mistral.
On our radar: “Face to face: the United States against China”
The United States and China have attempted to stabilize their relations in recent months, but underlying tensions between the world’s two largest economies show no sign of letting up any time soon. Treasury Secretary Janet Yellen criticized Beijing during a trip to China in recent days, accusing it of “coercive actions against American companies” and warning that its state-backed manufacturers are distorting global markets.
This harsh rhetoric comes just days after a parade of business leaders met with Chinese presidentXi Jinping – a sign that they want to stay engaged there despite the obvious challenges.
“Face to face: the United States against China” is an eight-part podcast debuting Tuesday that seeks to explain the relationship and why the dangers are so high. The series is hosted by Jane Perlez, former New York Times Beijing bureau chief, now at Harvard’s Kennedy School, and features prominent historian Rana Mitter. Perlez told DealBook the goal was to offer listeners “a rational approach” to understanding one of America’s greatest challenges.
Perlez and Mitter discuss everything from Apple’s remarkable rise in China and the future of Taiwan to Chinese espionage and personal relationships between Biden and Xi, and they interview diplomats, spies, tech experts and military – even Yo-Yo Ma.
