President
Joe Biden
in his State of the Union address will tout economic advances since he was sworn into office. Here are the facts and the spin behind the claims.
When Biden was sworn in, the economy was still reeling from the
coronavirus
pandemic but beginning to recover. Since then, the economy has made great strides, although it has also been challenged by harsh inflation and fears of recession.
Jobs
Biden has touted massive job growth as proof that his economic agenda is working and is set to make the employment gains a key part of his address Tuesday night, according to a preview from the White House.
Biden is right that job growth has been strong. The economy gained 517,000 jobs in January, smashing expectations. The unemployment rate at 3.4% is also the lowest it has been since 1969.
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And it is true that the economy added over 12 million jobs on a seasonally adjusted basis when counting from the start of Biden’s tenure (and including all the jobs in his first month) through January of this year.
The president is also expected to note that 2021 and 2022 were the strongest two years of job growth in history. That is also correct, although
more context is needed
to understand those gangbuster numbers.
The most important caveat is that a lot of those jobs were regained by people who had lost them during the pandemic, so it would be more accurate to frame it as job recovery rather than typical job growth. The jobs added since early 2021 largely reflect businesses reopening and workers finally returning to the labor force, a process that was ongoing when Biden entered office.
Inflation
Biden will undoubtedly speak about how inflation is beginning to abate. And it is — but it is still being far too high.
The consumer price index, the most widely cited inflation gauge, fell to 6.5% in December, and the personal consumption expenditures price index, which is one the Federal Reserve closely watches, fell to 5% from a high of 7% in June. And producer wholesale prices
slowed
to 6.2%.
While inflation is coming down, the big asterisk is that it is still magnitudes higher than is healthy — the Fed prefers that inflation run at about 2% on an annual basis. It is also worth noting that the Fed itself is thought to be largely responsible for the recent declines, not the White House. The central bank has been jacking up interest rates to curb economywide spending and bring down inflation.
Many economists actually blame the Biden administration for contributing to the inflationary pressures to begin with. Biden’s $1.9 trillion American Rescue Plan Act, which garnered no Republican support, was blamed in part for infusing the economy with money and driving up demand. It is worth noting that stimulus spending not only under Biden but also under former President Donald Trump has been tied to inflation.
Biden will likely praise the Inflation Reduction Act, which was passed last year. The name isn’t entirely accurate given it was first and foremost a healthcare and clean energy bill. The nonpartisan Congressional Budget Office released a report during the drafting of the bill estimating that the legislation would have a negligible effect on inflation during 2022 and 2023.
Gas prices
Biden is expected to note that gas prices have been falling from their record highs notched over the summer. As of January, a gallon of regular gasoline was selling for $3.46, according to data from the Energy Information Administration. That is a hefty 31% decline from June, when gas rose to over $5 per gallon.
Still, consumers are paying more today than they were before Biden was sworn into office. Gas was about $2.28 per gallon in December 2020, a month before Biden’s inauguration. That means families are paying more than 50% more to fill up their cars.
Wages
Finally, the president is expected to speak about wage growth on Tuesday. And wages have risen. Nominal wage growth for nonfarm employees
was up
5.1% in the 12 months ending in January, according to the Economic Policy Institute.
But wage growth hasn’t been able to keep pace with inflation — in other words, inflation-adjusted wages are down. 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.
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As for the State of the Union, Biden is scheduled to speak before a joint session of Congress on Tuesday at 9 p.m. EST. Arkansas Gov. Sarah Huckabee Sanders will give the Republican response to the address afterward.
