Cecilia Rouse is chair of the White House Council of Economic Advisers.
These are extraordinary times for America’s economy. Recent data suggest that our labor market remains strong even as inflationary pressures are showing signs of easing.
The employment report earlier this month suggested U.S. employers added 517,000 jobs in January, well above what private forecasters were expecting. The unemployment rate in January was the lowest it’s been since 1969. Over 12 million jobs have been created since President Joe Biden took office.
Certainly, as we also learned today, inflation remains too high; its path forward is likely to be somewhat volatile as world events continue to affect the price of commodities, especially food and energy. However, there are signs inflation is easing. Annual inflation back in June 2022 was 9.1%; last month, it had declined to 6.4 percent. In fact, annual inflation has declined seven months in a row.
At the same time, we have experienced the fastest jobs recovery from a recession in the last three decades. While the Council of Economic Advisers, where I serve as chair, is always cautious about one month’s numbers, the inflation and employment reports and the revisions that accompanied them reinforce this administration’s economic strategy to rebound from the global pandemic.
The labor market is an important indicator of the health of the overall economy, so the specifics of the employment report are worth paying attention to. January’s job growth was relatively broad-based, with gains strongest in leisure and hospitality, health care, and professional and business services. Manufacturing jobs are now up by more than 800,000 over the past two years. Average wages rose in January, and wages adjusted for inflation are higher than last June.
Much of the job growth was for the lowest earners — think fast food workers. Workers returned to hospitals, nursing homes, and long-term living facilities. The number of people who reported being absent from work due to illness fell by over 2 million this January compared to last.
In January, the unemployment rate was 3.4%, with Black unemployment and unemployment for workers with less than a high school degree at near record lows. And this has been one of the fastest recoveries of prime-age labor force participation in history, with labor force participation for women ages 25 to 54 almost back to its pre-pandemic level.
Positive signs of the resilience in our economy are not just in the employment report. Fourth-quarter GDP showed an economy that continued to grow last year. Annual inflation has declined each month over the past six months. Since the start of the Biden administration, more than 10 million small businesses have been created. Initial unemployment insurance claims remain near historic lows.
Further, by a number of measures families are doing better financially than before the pandemic. Americans still have around $1 trillion in additional savings from the pandemic. Average inflation-adjusted wealth for the middle-class is up $65,000 per adult since the pandemic, and wealth for the bottom half has more than doubled. These resources contributed to continued growth in retail sales (adjusted for inflation) in 2022, and we’re seeing evidence that household spending on services like restaurants, live events, and hairdressers is beginning to renormalize.
What does all this tell me? Our economy is in the process of restabilizing after the incredible shock of the Covid-19 pandemic.
Importantly, thanks to the important investments made in President Biden’s signature legislation — the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act — our economy is poised to transition to strong, sustainable economic growth that is shared by all Americans.
Estimates are that these inputs into infrastructure, clean energy, health-care, and the digital economy will mean more than $3.5 trillion in public and private sector investment over the next decade. A key challenge moving forward is to ensure these dollars are spent wisely and efficiently, which is why President Biden has assembled an “invest in America cabinet” to focus on implementation of these historic achievements.
But the work is not done. Our economy is sustained by its workers, and we need to ensure that they have the support they need to engage in the labor market while also taking care of their loved ones. Key to doing so is to provide access to quality child and elder care, as well as guaranteeing paid leave for new parents, the sick, or those with an ailing loved one, as all other advanced countries do. Education and training to build skills are also critical so that all workers are prepared for the jobs of the future. Health insurance must be affordable so that all Americans have access to the care they need.
Looking back to where we were when President Biden came into office and the progress we have made is extraordinary. In March 2020, economic activity suddenly came to a halt as people around the globe sheltered to stay safe from a novel virus. We were never going to power back up what was then a $22 trillion economy overnight, and bumps along the way to recovery were (and still are) inevitable. But the fact that we are almost back is a credit to the economic vision of this administration.