President Joe Biden took the time to celebrate the May jobs report. On the surface, it was an excellent snapshot of the labor market that satisfied the White House. However, the details of the Bureau of Labor Statistics (BLS) highlighted a few things, including that 1.8 million Americans could not find work because their employers shut down or lost business, and the jobs were still 0.5% below the pre-pandemic level. Still, let’s give credit where credit is due and give the man a round of applause.
So, the president delivered a speech highlighting the employment numbers. Yet, within his prepared remarks, Biden made quite the befuddling statement that was devoid of facts. Indeed, if it had been former President Donald Trump uttering these words, it would be a national scandal, filled with “the walls are closing in” and Carl “This is Worse Than Watergate” Bernstein.
“Since I took office, families are carrying less debt; their average savings are up,” President Biden said. “A recent survey from the Federal Reserve found that more Americans feel financially comfortable than at any time since the survey began in 2013.”
But everything he purported is entirely incorrect. Let’s take a look at the numbers.
First, according to the Federal Reserve Bank of New York (FRBNY), total household debt increased by $266 billion, increasing it to a record high of $15.84 trillion in the first quarter. Moreover, credit card balanced surged by $52.4 billion in March, the largest quarterly gain on record. Last year, US household debt advanced by $1 trillion, the biggest annual increase in debt since 2007.
Second, the personal savings rate had collapsed from when Biden took office, cratering to just 4.4% in April, according to the Commerce Department. This is the lowest level since September 2008.
Finally, the idea that Americans feel financially comfortable is laughable. The FRBNY’s Survey of Consumer Expectations reported that nearly one-third of Americans anticipate their financial situation will be worse off one year from now, while about half do not expect a change. Moreover, multiple polls show that most Americans’ chief concern is inflation. In addition, a new American Psychological Association Stress In America survey learned that 87% of Americans say inflation “is what’s driving their stress.”
It was not surprising, too, that the president had to invoke the key phrase “Putin’s price hike.” He blamed the Russian leader and his war in Ukraine for higher prices at the supermarket and gasoline stations. “Bringing down the costs — here’s where we stand: The two challenges on the minds of most working families are prices at the pump and prices at the grocery store. Both of these challenges have been directly exacerbated by Putin’s war in Ukraine,” he averred. Once again, the president is ignoring the fact that price inflation, whether at the grocery store or local gas station, was already surging before the military conflict in Eastern Europe.
Russian President Vladimir Putin touched upon US monetary policy in a recent television interview following a meeting with African leaders. According to Putin, the primary cause for skyrocketing price inflation, particularly in relation to food, has been the Federal Reserve’s enormous money printing campaign. “It began to take shape as early as February 2020 in the process of combating the consequences of the coronavirus pandemic,” he asserted. And he is completely correct: The US central bank injecting $9 trillion in freshly created units of currency into global financial markets was inevitably going to lead to inflationary doom.
Powell and Co. Not Rescuing Stocks
With the US benchmark indexes recording another weekly loss, there has been some expectation that the central bank would trim its ultra-aggressive quantitative tightening program to help stop the bleeding on Wall Street. For now, it appears that the Fed will not be doing such a thing because it is infatuated with putting an end to 40-year high inflation.
This was essentially confirmed by Cleveland Fed Bank President Loretta Mester, telling CNBC that it is not clear if inflation has peaked and, therefore, more and potentially higher rate hikes are critical. In other words, the century-old institution will not be tapering its tightening anytime soon, meaning more strain on the equities arena and greater losses for institutional investors and armchair traders.
“It’s too soon to say that that’s going to change our outlook or my outlook on policy,” Mester told CNBC. “The No. 1 problem in the economy remains very, very high inflation, well above acceptable levels, and that’s got to be our focus going forward.”
The US stock market is in the red, gasoline prices are hitting record highs, food costs are spiraling out of control, baby formula shortages are widespread, and consumer debt levels are increasing again. While it is easy to poke fun at Bidenomics as the chief source of the nation’s woes, it is the Federal Reserve System that is the primary culprit for today’s mess. Although, Biden might reiterate his confidence in the organization, there is very little reason why anyone listed in the Yellow Pages should share that faith.