As the Biden presidency enters its second year, Treasury Secretary Janet Yellen called the Commander-in-Chief’s economic policy a “remarkable success.”
During an interview with CNBC, Yellen lauded decreases in the unemployment rate while expressing hope for lower inflation.
“A year ago, if you go back to the challenges that we were facing, and the Federal Reserve was facing, unemployment was extremely high. We were all worried that we would be facing a situation like we had after 2008, when it took almost a decade to get back to full employment,” Yellen said. “I think it has to be viewed as a remarkable success that the unemployment has fallen the most in a year in American history.”
Though President Biden’s economy observed 6.4 million new positions filled in 2021, many note that three million jobs lost during COVID-19 and the lockdown-induced recession remain unrecovered. Indeed, one study reveals that $300-per-week federal unemployment checks — extended into September 2021 by President Biden’s American Rescue Plan — caused slower job recovery.
Meanwhile, inflation has risen dramatically from 1.4% to 7% — a four-decade high — under the Biden administration. During the interview, Yellen admitted that she desires lower price level increases as 2022 unfolds.
“I expect inflation throughout much of the year — 12-month changes — to remain above 2%,” she said. “But if we’re successful in controlling the pandemic, I expect inflation to diminish over the course of the year and hopefully revert to normal levels by the end of the year around 2%.”
Despite Yellen’s prediction, Larry Lindsey — the director of the National Economic Council under President George W. Bush — recently warned that inflation could be “above” 2021 levels in 2022.
“There is never an example of getting inflation to this level, embedded in the labor market and it ending without recession… I don’t think we’re going to have a recession this year,” he said. “Slower growth, maybe. So I don’t think there’s any chance at all decelerating inflation.”
Although nominal pay for American workers is rising, inflation is rising faster. According to data from the Bureau of Labor Statistics released earlier this month, “real average hourly earnings” — which consider the effect of inflation — decreased by 2.4% from December 2020 to December 2021. In other words, an American earning $50,000 at the beginning of 2021 is currently earning the equivalent of $48,800.
Polls consistently find that the economy is a major pain point for voters evaluating President Biden’s first year. As one Fox Business survey explained: “Just 1 in 6 voters say they are better off financially than they were a year ago, and a majority rates their personal financial situation negatively. That’s a reversal since August, when over half said their finances were in positive shape.”
The same poll found that 47% of Americans believe President Joe Biden’s policies are “hurting” the economy, while only 22% believe they are “helping.” Likewise, 46% believe that Biden’s social spending agenda would “push inflation higher,” while 21% believe it would “help lower inflation.”