May 18, 2022

Good news that nobody cares about

One thing is right for President Biden. The job market remains hot, with companies hiring just about anyone they can find. Employers added 678,000 jobs in February, far more than expected by economists. The February report was uniformly solid, with gains in almost all sectors. Upward revisions to job growth over the previous two months show that the ramp-up of the Omicron COVID variant had little to no effect on hiring.

This may not benefit Biden at all, politically. Americans are now very concerned about inflation, which is expected to worsen in the coming weeks due to the Russian invasion of Ukraine and its impact on oil and gas prices. Oil prices have risen $25 a barrel since the start of the Russian invasion on Feb. 24, and $36 a barrel since the start of the year. This directly affects gasoline prices, which rise about 50 cents per gallon to a national average of $3.84. Average prices are expected to top $4 soon and could eclipse the all-time high of $4.11 from 2008.

There might be a little more tolerance than usual for soaring gasoline prices, given widespread sympathy for Ukrainians enduring a savage invasion. The willingness to bear higher energy costs, in a way, is the average consumer’s contribution to the sanctions that the United States and many allied countries have imposed on Russia. These sanctions do not include energy, but prices have still risen due to fears that Russian energy supplies could be disrupted and new difficulties Russia is facing in shipping oil and gas due to imposed sanctions. to its financial system.

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But soaring gas prices are perilous for Biden, anyway, for three reasons. First, while Biden gets high marks for unifying his allies in favor of Ukraine, he hasn’t prepared Americans for any type of sacrifice. In fact, he has repeatedly said that he was trying to protect the US economy from rising prices, given that inflation was at 7.5% before the Russian invasion. Gas prices are going up anyway and drivers are going crazy.

Second, many voters associate Biden’s push for green energy with rising gas prices, though the connection is tenuous at best. Voters mistakenly think Biden’s cancellation of the Keystone XL pipeline, which would have been from Canada to Nebraska, took oil off the market and drove up prices, when in reality it wasn’t even built or operational . Some believe Biden has put the brakes on drilling, when in fact drilling permits on public lands under Biden have so far increased. By demonizing fossil fuels and pushing for renewable energy, Biden has given the impression that he is happy to drive oil off the market, no matter how much it costs consumers. It doesn’t actually do that, but it will now be hard to persuade skeptics otherwise.

Rising gas prices are also the most tangible economic indicator there is, since everyone sees the price of gas and exceeds $10 or $20 more per fill-up. A strong labor market or a low unemployment rate does not show up directly in the family budget. Rising costs do, especially for a commodity like gasoline, which most people have to buy. Job growth could be four times stronger or 10 times stronger, and it still wouldn’t overcome the gas price shock.

WASHINGTON, DC – MARCH 04: United States President Joe Biden speaks about the February jobs report during an event at the White House complex on March 4, 2022 in Washington, DC. The US economy added 678,000 new jobs in February. (Photo by Win McNamee/Getty Images)

With average gasoline prices rapidly heading towards $4 a gallon, headline inflation could hit 10% within months. Inflation has not yet hindered employment or economic growth, but if it gets much higher and stays there for a while, it will. Wage growth, at 5.1%, is not keeping up with inflation, which is eroding purchasing power. Consumers spent freely, tapping into savings they had accrued while stuck at home during the worst of the COVID pandemic. But this spending boom could run out of steam.

“The boom seen in 2021 is at risk of collapsing in 2022,” Patrick O’Hare of Briefing.com wrote in a March 4 market analysis.

The Federal Reserve has made clear its intention to start raising interest rates in mid-March as an antidote to inflation. Fed Chairman Jay Powell also acknowledged that the Fed should have acted sooner. So if the Fed manages to fix the problem, it will come later than desired and at a higher cost to consumers than necessary.

Biden says he has his own plan to cut prices, but that would force Congress to act. In his March 1 State of the Union address, Biden said he wants Congress to pass legislation that lowers prescription drug prices, subsidizes green energy and covers child care costs. for millions of families. It’s part of his “build a better America” ​​plan, the new and improved version of “build back better.” Congressional Democrats, however, continue to bicker over what to prioritize and who to blame if they can’t do anything. For voters, this is not a problem. They will blame Biden whether he deserves it or not.

Rick Newman is a columnist and author of four books, including “Rebounders: how winners go from failure to success.» Follow him on Twitter: @rickjnewman. You can also send confidential advice.

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