Recent headlines for the January jobs report indicate a robust economy. But a more thorough look reveals challenges for Americans.
One recent headline proclaimed “Voters are finally noticing that Bidenomics is working.” But just 30 percent of Americans think the economy is doing well. When asked who would handle the economy better, people give former president Donald Trump a 22-point advantage over President Biden.
Challenges include increasing part-time employment in recent months, declining household employment in three of the last four months for a net decline of 398,000 job holders, mounting public debt burdens, and declining real wages, which have fallen by 4.4 percent since January 2021.
Why these results? Bidenomics is based on costly Keynesian boom-and-bust policies. With so much whiplash, it’s no wonder people are conflicted about the economy.
In the latest jobs report for January, a net increase of 353,000 nonfarm jobs from the establishment survey appears robust, as it was well above the consensus estimate of 185,000 new jobs. But let’s dig deeper.
Last month, household employment declined by 31,000, contradicting the headlines. The divergence of jobs added between the household survey and the establishment survey has widened since March 2022. This period coincides with declining real gross domestic product in the first and second quarters of 2022 (usually that’s deemed a recession, but it hasn’t been yet). Indexing these two employment levels to 100 in January 2021, they were essentially the same until March 2022, but nonfarm employment was 2.5 percent higher in January 2024.
While this divergence mystifies some, a primary reason is how the surveys are conducted.
The establishment survey reports the answers from businesses and the household survey from individual citizens. The establishment survey often counts the same person working in multiple jobs, while the household survey counts each person employed. This likely explains much of the divergence, as many people work multiple jobs to make ends meet. The surge in part-time employment and more discouraged workers underscores the fragility of the labor market.
Though average weekly earnings increased by 3 percent in January over a year prior, this is below inflation of 3.1 percent. Real average weekly earnings had increased for seven months before falling last month. And there had been declines in year-over-year average weekly earnings for 24 of the prior 25 months before June 2023. These real wages are down 4.4 percent since Biden took office in January 2021.
As purchasing power declines, mounting debts become more urgent.
Total US household debt has reached unprecedented levels, with credit card debt soaring by 14.5 percent over the last year to a staggering $1.13 trillion in the fourth quarter of 2023. Such substantial growth in debt raises concerns about the current (unsustainable?) consumption trends, business investment, and a looming financial crisis.
The surge in mortgage rates to over seven percent for the first time since December and rising home prices exacerbate housing affordability challenges, particularly for aspiring homeowners. An integral component of what some consider the “American Dream,” housing affordability is a major factor discouraging Americans.
The euphoria surrounding the January 2024 jobs report is misplaced. Policymakers should heed these warning signs and enact meaningful reforms to address root causes.
Biden’s policy approach undergirds most of these difficulties. Bidenomics focuses on his Build Back Better agenda that picks winners and losers by redistributing taxpayer money for supposed economic gains through large deficit spending.
We haven’t seen an agenda of this magnitude since LBJ’s Great Society in the 1960s or possibly since FDR’s New Deal in the 1930s. Both were damaging, as the Great Society dramatically expanded the size and scope of government, contributing to the Great Inflation in the 1970s, and the New Deal contributed to a longer and harsher Great Depression.
Just since January 2021, Congress passed the following major spending bills upon request of the Biden administration:
$2 trillion American Rescue Plan Act in March 2021
$1 trillion Infrastructure Investment and Jobs Act in November 2021
$280 billion CHIPS and Science Act in August 2022
$1 trillion Inflation Reduction Act in August 2022
These four bills nearly $4.3 trillion added to the national debt. But at least another $2.5 trillion was added for student loan forgiveness schemes, SNAP expansions, net interest increases, Ukraine funding, PACT Act, and more. In total, about $7 trillion in new debt in three years brought the gross federal debt to $34 trillion — a 26 percent increase. There seems to be no end to soaring debt with the recent discussions of more taxpayer money to Ukraine, Israel, the border, and the “bipartisan tax deal,” collectively adding at least another $700 billion to the debt over a decade.
Record debts accrued by households and by the federal government (paid by households) are not signs of a robust economy. This will likely worsen before it improves, as household savings dry up. And with interest rates likely to stay higher for longer because of persistent inflation, debts will crowd out household finances and the federal budget.
The Federal Reserve has monetized much of this increased national debt over the last few years by ballooning its balance sheet from $4 trillion to $9 trillion and back down to a still-bloated $7.6 trillion. This helps explain persistent inflation, massive misallocation of resources, and costly malinvestments across the economy, keeping the economy afloat yet fragile.
Excessive deficit spending weighs heavily on future generations, saddling them with unsustainable debt levels they have no voice in. Today, everyone owes about $100,000, and taxpayers owe $165,000, toward the national debt. Of course, these amounts don’t include the hundreds of trillions of dollars in unfunded liabilities for the quickly-going-bankrupt welfare programs of Social Security and Medicare.
Future generations will be on the hook for even more national debt if Bidenomics continues and Congress doesn’t reduce government spending now. This is why the national debt is the biggest national crisis for America. We’re robbing current and future generations of their hopes and dreams.
Fortunately, there’s a better path forward if politicians have the willpower. This path should be chosen before we reap the major costs of a bigger crisis. I’ve recently outlined what this should look like at AIER.
In short, we need a fiscal rule of a spending limit covering the entire budget based on a maximum rate of population growth plus inflation. There should also be a monetary rule that ideally reduces and caps the Fed’s current balance sheet to at least where it was before the lockdowns. My work with Americans for Tax Reform shows that had the federal government used this spending limit over the last 20 years, the debt would have increased by just $700 billion instead of the actual $20.2 trillion. That’s much more manageable and would point us in a more sustainable fiscal and monetary direction.
Together, fiscal and monetary rules the rein in government will help reduce the roles that politicians and bureaucrats have in our lives so we can achieve our unique American dreams. If not, we will have wasted many dreams on Bidenomics that can make things look good on the surface, but cause rot underneath.