President
Joe Biden
addressed the nation Tuesday night in his second
State of the Union
address. This is the Washington Examiner fact check for several of his claims on the economy.
When Biden was sworn in in in January 2021, coronavirus was still the biggest concern for the country, but now, the
economy
has become the biggest domestic issue for the administration and for American households, and Biden’s speech as prepared for delivery reflected that. Here are the claims and the context.
CLAIM: Biden says he has lowered inflation
“We have more to do, but here at home, inflation is coming down. … Food inflation is coming down,” Biden said, adding that inflation has fallen for the past six months.
FACT CHECK
Inflation has come down in recent months but is still higher than when he came into office by the most commonly cited metrics.
Inflation has indeed been on the decline over the past few months from the peaks notched over the summer.
The consumer price index showed the inflation rate at 6.5% on an annual basis in December. That means that, overall, prices for all items have increased by that average amount from December 2021 to December 2022. When volatile food and energy costs are removed, everything else increased by 5.7% during that same period.
STATE OF THE UNION 2023: SEPARATING FACT FROM FICTION ON BIDEN ECONOMIC CLAIMS
That 6.5% number does show improvement. Inflation peaked at a jaw-dropping 9.1% back in June. Since then, the headline number has fallen every month to where it is now. And inflation has been low or even negative in recent months on a month-to-month basis. So Biden is correct that inflation is on its way down in a meaningful way, although there are two caveats to touting that news.
The first is that even though price increases are cooling, they are still far too high. Biden has become the first president since Ronald Reagan back in 1981 to see the CPI above 9%. The Federal Reserve prefers inflation to run at a healthy 2% rate, so even with the CPI cooling to below 7%, it is still magnitudes higher than what it should be in a functioning economy.
The second caveat is that while Biden has hailed inflation’s decline, it is a stretch for him to credit his policies, with perhaps the exception of
some efforts
to help ease supply chain snarls. Instead, the Fed is thought to be largely responsible for the declines, as it has hiked interest rates by a historic degree in order to force demand to cool and inflation to fall.
While Biden has touted the Inflation Reduction Act (passed at the end of 2021 with no Republican support), the healthcare and clean energy legislation does little to address inflation in the near term. The nonpartisan Congressional Budget Office released a report during the drafting of the bill estimating that the bill would have a negligible effect on inflation during 2022 and this year.
CLAIM: Falling gas prices are helping consumers
“Here at home, gas prices are down $1.50 a gallon since their peak.”
FACT CHECK
Gas prices have fallen in recent months but are higher than when Biden took office.
Gas prices have been falling since peaking at over $5 per gallon in June of last year. In fact, the average price of a gallon of gas has fallen by more than 30% since the summer highs, according to the Energy Information Administration. A gallon of regular gasoline was selling for an average of $3.45 last month.
More context is needed, though. While the falling prices are being hailed by the White House — and the declines have objectively helped consumers over the past six months — gas prices are still much worse for commuters than they were before Biden took the oath of office.
In December 2020, a month before Inauguration Day, the EIA reports that a gallon of gas cost $2.28. That means during Biden’s time in office, gas has become 51% more expensive, a degree of increase that leaves the price growth for many other goods and services in the dust.
CLAIM: There has been historic job growth under Biden and the labor market is booming
“Two years ago, our economy was reeling. As I stand here tonight, we have created a record 12 million new jobs — more jobs created in two years than any president has ever created in four years.”
FACT CHECK
The labor market is strong. Recent job growth has been strong, and the unemployment rate fell in January to 3.4%, the lowest level it has been since Richard Nixon sat in the Oval Office. But there is some perspective and background that is often left out of the celebrations by Biden and the White House.
Biden’s claim of record job growth is, on its face, accurate. From January 2021 through this past month, the economy added over 12 million jobs on a seasonally adjusted basis. That is a lot of jobs — far above the number of jobs added over that same period for Biden’s predecessors. For reference, 4.7 million jobs were created during that time under former President Donald Trump; 4 million were lost under Barack Obama; 2.1 million were lost under George W. Bush; 7 million were added under Bill Clinton; and 2.1 million were notched under George H.W. Bush.
Still, the important context is that when Biden entered office, the economy was still millions of jobs short of where it was prior to the pandemic and the mass shutdowns of businesses. Most of those jobs that Biden has touted adding to the economy were merely positions that were lost because of the pandemic and then regained during reopening — so it would be more accurate to frame Biden’s headline 12 million employment figure as job recovery rather than job growth.
Additionally, employment rates have still not fully recovered. The employment-to-population ratio stood at 60.2% in January. That is down from the 61.1% level it was at in February 2020.
CLAIM: Manufacturing boom leads to job growth in sector
“We’ve already created 800,000 good-paying manufacturing jobs, the fastest growth in 40 years. Where is it written that America can’t lead the world in manufacturing again?”
FACT CHECK
This claim is true but goes hand in hand with the Biden administration’s other remarks about the labor market. From January 2021 through last month, the manufacturing sector added a hearty 800,000 workers to its payrolls. That is definitely a substantial increase, although it must also be looked at through the lens of economic recovery from pandemic-era lows. Overall manufacturing employment was 214,000 higher in January than in February 2020.
It is worth noting that the Biden administration has strengthened the rules for what classifies as Made in America, a boost for the manufacturing sector. Prior to Biden, products qualified as Made in America for federal procurement if 55% of the value of their components was domestically manufactured. That level rose to 60% last year, 65% in 2024, and 75% in 2029.
CLAIM: Wage growth has been strong under Biden
“Inflation has fallen every month for the last six months while take-home pay has gone up.”
FACT CHECK
It is true that wages have risen, but inflation has risen faster, meaning that inflation-adjusted wages have fallen under Biden.
Nominal wage growth for nonfarm employees just in the past year
was up
4.4%, according to the Economic Policy Institute. Nominal wage growth from January 2021 to January ’22 was 5.7%. The combination of both years shows Biden is correct in asserting strong nominal wage growth.
But the keyword there is “nominal.” Real wage growth is a much more important measure of how peoples’ incomes are changing because it also takes inflation into account. In the 12 months ending in December, real average hourly earnings for employees declined by 1.7%, according to
data
from the Bureau of Labor Statistics. Median weekly real earnings have fallen by 3.4% since the start of 2021, according to data from the bureau.
CLAIM: Under Biden, the US had its two strongest years of business application in history
“Over the last two years, a record 10 million Americans applied to start a new small business. Every time somebody starts a small business, it’s an act of hope.”
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FACT CHECK
It is true that business applications have been higher in the past two years than any time before, according to data from the U.S. Census Bureau.
But applications spiked before Biden took office. The increase in business creation appears to be a feature of the recovery from the pandemic rather than driven by Biden policies.
