Inflation data released on Wednesday shows that price increases are returning closer to normal levels and that wage growth is significantly above inflation for the first time in over two years, offering some of the most hopeful news about the economy since prices skyrocketed 16 months ago.
The Consumer Price Index, which tracks inflation, rose 3% in the year through June, less than the 4% increase in the year through May and down considerably from its roughly 9% peak last summer, signaling that the Federal Reserve may pause interest rate hikes later this fall on the heels of stronger-than-anticipated economic conditions.
President Joe Biden celebrated Wednesday’s report, pointing to steps his Administration has taken to tackle costs while creating new jobs. “Our progress creating jobs while lowering costs for families is no accident, and I will continue to fight for lower costs for families every day,” he said in a statement. “I ran for office to grow the economy from the middle out and bottom up, not the top down: that’s exactly what we’re doing.”
For Biden, any positive data about the economy could help his reelection bid. Poll numbers show that most people remain skeptical of his economic policy, with 56% of Americans saying they disapprove of Biden’s handling of the economy, according to a June Yahoo-YouGov poll. Persistent inflation has been one of the main sticking points in the public’s perception of his presidency.
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Winning the economic debate may be Biden’s most important political objective as he enters the 2024 race. Democrats know that their chances of keeping the White House largely hinge on the economy and are severely diminished if voters see the Republican nominee as more capable and trusted on the issue. “Whoever the Republican nominee for president is, they should litigate Biden’s record on the economy,” says Robert Blizzard, a veteran GOP pollster. “It’s a very strong-point winning issue for Republicans. You can look back at the 2022 midterms, and Republicans still did very well because there’s so much frustration about the economy.”
In recent weeks, Biden has been rolling out his economic pitch to Americans. It started with a speech in Chicago on June 28 where he branded his policies as “Bidenomics” and positioned them in opposition to trickle-down “Reaganomics.” Since then, Biden and his cabinet have been on a tour across the country to make their case to voters.
In all, the economy has added more than 13 million jobs since Biden took office. The unemployment rate, at 3.6%, is near longtime lows as employers are hiring hundreds of thousands of new workers each month. One popular gauge of the economy’s strength—the “misery index,” which adds together the unemployment and inflation rates—is lower now than it’s been during 83% of all months since 1978.
Yet polls show Americans believe the economic outlook to be grimmer than these stats suggest. Economists say it may take time for changes in inflation or economic policy to feed through to the economy and impact public perception. Although inflation has been falling for nearly a year, the process has been gradual and many individual prices still remain considerably higher than they were when Biden took office.
For instance, the price of gasoline, which soared in 2022 after Russia’s invasion of Ukraine, is still around $3.55 a gallon. That is well below last year’s peak of $5.10 a gallon, but higher than the $2.50 a gallon cost in January 2021 when Biden took office. The price of eggs is another example. A dozen eggs that cost $1.47 when Biden took office now cost $2.20, though that price has significantly fallen from the $4.82 it cost in January.
The White House is hoping the public will start to take notice. In a recent Economist/YouGov poll, 75% of respondents said that inflation was a very important issue to them, compared with 68% who said the same thing about health care, 51% for immigration, and 50% for abortion, suggesting that the economy will be the most central issue to Biden’s re-election campaign.
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