President Joe Biden touted the country’s falling inflation and low unemployment during his annual State of the Union address. Here are the facts and the context.
This is Biden’s fourth State of the Union speech. Since he was sworn into office, the country has experienced the worst inflationary scourge in decades, and people are still burdened by the higher prices and the higher interest rates.
The state of the economy is still quite poor in the minds of voters, despite the positive developments that Biden discussed on Thursday night. The Biden administration has sought to explain to voters how the economy is, in many ways, outperforming expectations. But Biden also left out key details that might look unfavorable to his constituents.
Inflation
Inflation is supposed to run at a 2% annual pace — at least, that is what the Federal Reserve considers to be healthy. The month that Biden became president, January 2021, the consumer price index was running at a cool 1.4%.
“Wages keep going up, and inflation keeps coming down!” Biden told the nation. “Inflation has dropped from 9% to 3% — the lowest in the world! And trending lower.”
By the time of Biden’s first joint speech to Congress that April, annual inflation had already more than doubled to 4.1%. By Biden’s second State of the Union address in March 2022, the CPI had risen to 8.5%. Last year, after the Fed finally began raising interest rates, inflation had fallen to 4.9%.
This year, inflation is much lower than its peak and was clocking in at 3.1% in January, the most recent CPI reading.
Biden is correct that inflation has been falling under his watch.
Much of the improvement, though, is generally credited to the independent Federal Reserve’s historic campaign to ease price pressures by rapidly raising interest rates
Another important note of context is that Biden might be at least partially responsible for its meteoric rise over the past few years. Republicans and some economists contend that the rash of federal spending during the pandemic, including the massive Democrat-backed American Rescue Plan Act, overheated demand and led to the inflationary plague.
Former President Donald Trump also infused the economy with trillions of dollars of stimulus during the pandemic, so some economists argue he is also to blame.
During Thursday night’s speech, Biden mentioned the partisan Inflation Reduction Act, legislation that passed in 2022 without any Republican support. Despite the name, the healthcare and clean energy legislation did little to address inflation in the near term.
The nonpartisan Congressional Budget Office released a report during the drafting of the bill estimating that the bill would have a negligible effect on inflation during 2022 and 2023.
Jobs and unemployment
Biden also used his State of the Union Speech to tout the country’s massive job growth and low unemployment.
“I inherited an economy that was on the brink,” Biden said. “Now our economy is the envy of the world! 15 million new jobs in just three years — that’s a record! Unemployment at 50-year lows.”
The unemployment rate was at 6.1% the month Biden entered office. Since then, it has fallen to historic lows. For the past 24 months, the unemployment rate has fluctuated between 3.4% and 4%, a low rate that is good news for the economy and a feather in Biden’s cap. In fact, 3.4% is the lowest that the unemployment rate had been since Richard Nixon sat in the Oval Office.
From January 2021 through this past month, the economy added nearly 15 million jobs. on a seasonally adjusted basis. That is a lot of jobs — far above the number of jobs added over that same period for Biden’s predecessors.
For reference, 6.9 million jobs were created during that time under former President Donald Trump; 1.6 million were lost under Barack Obama; and 1.8 million were lost under George W. Bush.
Still, the key context is that when Biden entered office, the economy was still millions of jobs short of where it was prior to the pandemic and the mass shutdowns of businesses. A lot of those jobs that Biden has touted adding to the economy were merely positions that were lost because of the pandemic and then regained during reopening
Additionally, employment rates have still not fully recovered. The employment-to-population ratio stood at 60.2% in January. That is down from the 61.1% level it was at in February 2020, right before the pandemic took hold.
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Taken together, while Biden’s State of the Union address highlighted the bright spots of the economy, it did leave out some key context. The next few months will be crucial for Biden, who is expected to take on Trump in the general election.
Republicans will undoubtedly torch Biden for the too-hot inflation, while the Biden campaign will try to emphasize the fact that inflation is moving down and the country’s strong labor market and economic expansion.