Disappointing economic growth proves Covid remains biggest problem for Joe Biden

In other words, the economy’s growth slowed from its sustained pace of 6.7% in the second quarter, largely for the same reason as job growth in August and September did. was not up to par. This is also a major reason why, much to the chagrin of American consumers and the White House, inflation is showing no signs of slowing anytime soon.
The reason is the persistence of the novel coronavirus, which continues to shape the contours of economic performance in the United States and around the world. After the rise in vaccinations pushed the pandemic back earlier this year, the push for the Delta variant immediately receded.

“The main reason for the slowdown is the Delta variant,” said Jan Hatzius, chief economist at Wall Street firm Goldman Sachs.

“It is clear what happened to the GDP,” added Betsey Stevenson, a University of Michigan economist who advised President Barack Obama in the White House. “It is affected by Covid, not just in the United States but around the world. “

“The pandemic,” concluded Mark Zandi, chief economist at Moody’s Analytics, “still drives the economic train.”

This reality clashes with the reflexes of the American political system, which gives each president inordinate credit for positive economic developments and inordinate blame for negative developments. Just in time, Stephen Moore – an economic commentator aligned with former President Donald Trump – called the new growth report “the latest evidence that Joe Biden’s pro-socialism policies of the big government have significantly slowed the economy down. economy”.

Biden’s policies were not unrelated to economic performance under his leadership. By sending money to the bank accounts of U.S. consumers, the $ 1.9 trillion U.S. bailout passed by Congress in March fueled growth earlier this year. This advantage has been at least partially offset, concede White House economists, by rising inflation resulting from increased demand for goods.

But most importantly was the administration of a year of Covid-19 vaccines, which allowed a substantial, although still incomplete, return to economic normality. The recovery has brought US economic output, alone among its industrialized peers, beyond its pre-pandemic level.

Economists say that the Delta variant, its path flattened by persistent vaccine resistance, delayed recovery in the third trimester in several ways. This has prevented some Americans, and discouraged others, from returning to claim some of the 10 million unfilled jobs in the economy.

And by hitting hard abroad, it has further disrupted global supply chains such as those for microchips, complicating the ability of manufacturers to produce cars, trucks and other products dependent on advanced technology. . Supply chain problems represent a major source of inflation which is now reducing the nominal wage gains that many workers have received.

So the sprawling economic package Biden is trying to close on Capitol Hill isn’t the most important thing he can do to accelerate the recovery over the next year or so. Whatever the benefits of its Build Back Better program for struggling families and the cause of slowing climate change, they will mostly come in the long term.

“The only economic policy that really matters now is the punches,” said Stevenson, the former Obama economist, one of the main reasons Biden dropped encouragement in favor of promoting mandates. of vaccines for private companies as well as the government.

The summer resurgence of Covid, with all of its social and economic ripple effects, has helped to significantly erode Biden’s public reputation. But the White House has reason to hope for an improvement in political and economic conditions in the near future.

The number of cases, hospitalizations and deaths related to the delta have declined. It is no coincidence that the latest Conference Board figures show a rise in consumer confidence in October after three months of decline.

Vaccination mandates have led more of those who were initially fearful, if not staunch resistance fighters, to be vaccinated. The U.S. Food and Drug Administration’s decision on Friday to allow Pfizer vaccine to be administered to children aged 5 to 11 promises protection for a large group of unvaccinated people.

“It will slow the spread of the virus to nonchildren,” said Austan Goolsbee of the University of Chicago, another former Obama adviser. “If we really put this thing in the jar, the economy wants to come back.”

Zandi sees a return soon to the 1 million per month job gains last seen in July, as well as a moderation in inflation as supply chains improve and demand declines as a result of consumers spending their Covid relief funds. Hatzius, the Goldman Sachs economist, predicts a fourth quarter rebound to 4% or more that the economy can sustain in midterm election year 2022.

Yet the economic outlook remains at the mercy of the coronavirus. The course of the pandemic will depend at least in part on conditions abroad, including the potential emergence of stubborn new variants.

“We are in a kind of post-pandemic recovery,” concluded Melissa Kearney, an economist at the University of Maryland. “It is not yet clear what direction this will take. The big unknown for Biden in 2022 is: ‘What will Covid do? “”


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