Jobs report is not a bad sign for Biden

The long-awaited 2023 recession is not happening.

Economists were expecting to see signs of a slowdown in the jobs report for January. The most jobs created by employers in July were created by hiring surge, with 517,00 new jobs created. The unemployment rate fell to 3.4%, the lowest since 1969.

President Trump used to boast about strong job numbers that reflected the greatest economy. That was hyperbole. Biden has a stronger claim to superlatives. The economy has created 12.1 million new jobs since he took office, the most of any president on record. The total of job creation during the same period of Trump's presidency was 4.5 million. The unemployment rate has been lower than the current 3.4%, but not since the post-World War II boom of the 1950s.

Biden is not shy about grabbing credit for an upbeat economy, whether he deserves it or not. On February 3, he said that The Biden economic plan is working and that the January job numbers are strikingly good news. It is doubtable whether Biden's policies are triggering this remarkable job growth, but for now, the economy is working for Biden.

Inflation is starting to break Biden's way, in addition to the seemingly bulletproof job market. The Federal Reserve is slowing down its monetary tightening cycle, with a modest quarter-point interest rate hike on February 1 that markets cheered. The Fed raised rates by a hefty 4.5 percentage point in 2022, but it is likely that rates will go up by only another half-point or so in 2023. On February 1 when Fed Chief Jerome Powell acknowledged that inflation was easing, stocks went up.

The inflation rate dropped from a high of 9% in June to 6.5%. That is still too high, given that the Fed would like to see it at around 2%. Spending data and wholesale markets suggest that inflation will drop as a result of the downward trend. By the middle of the year, it could be less than 5%.

The Fed's aggressive rate-hiking strategy has caused a recession, and the biggest concern is the excessive tightening that could cause a recession. That would show up clearly in the labor market, through job losses and a rise in the unemployment rate. The January numbers show that is not happening.

There is more good news in the jobs data. Wage growth slowed from December to January, which isn't great for workers, but it is an important signal for the Fed. Inflation can be caused by a wage price spiral in which workers demand hikes to compensate for higher inflation, and companies raising pay have to raise prices to account for higher production costs. A year ago, that seemed like a serious problem. Moody s Analytics reports on February 3 that a wage-price spiral is losing itsluster amid the panoply of risks facing the U.S. economy this year.

The economists admit that they have difficulty forecasting this peculiar post-pandemic economy, but they are sticking with their recession calls. Oxford Economics argued in February 3 that the labor market is hot but not that hot. The economy is going to slow down as the economy enters a recession due to the Fed's cumulative rate hikes. We expect outright job losses in the second half of the year and look for the unemployment rate to rise by about 1 percentage point. Consumers may have similar reservations. In January, confidence levels fell, and the buoyant labor market isn't helping Biden's approval ratings, which have been in the low 40 s for over a year. If the coming recession happens, maybe voters will get a boost once it's over and everyone stops talking about it.

Rick Newman is a senior columnist for Yahoo Finance.