President Joe Biden and his allies will point to the labor market to try to deny the economy is in recession for at least another month.
Today’s jobs report indicates that 372,000 jobs were created in June, and the unemployment rate remained at 3.6%. However, labor force participation fell to 62.2%, and there are still fewer people working today than before the pandemic.
Today’s jobs numbers come on the heels of the Atlanta Federal Reserve’s recent projection that the economy contracted in the second quarter of this year. It estimated gross domestic product (GDP) shrank by 1.2%, which, combined with the first-quarter slowdown of 1.6%, means the economy shrank in two consecutive quarters, indicating a recession.
Yet Biden and his fellow Democrats are trying to defy this recession reality by pointing to the supposedly strong labor market. Today, the White House said, “The historic strength of our job market is one reason our economy is uniquely well positioned to tackle a range of global economic challenges.”
This recession revisionism is flawed for a number of reasons. First, the labor market isn’t as strong as it seems. Despite Biden’s boasts, the jobs created under his administration aren’t new. They are merely backfilled from those lost during the pandemic. Labor force participation remains depressed. And real wages are falling significantly.
Second, it’s not only a contracting GDP that shows the economy is in recession. Inflation is wreaking havoc on consumers and small businesses. Over the last year, consumer prices have risen by 8.6%, and wholesale prices that small businesses pay have increased by 10.8%. Gas prices have doubled during Biden’s time in office to record highs. We’re not only in a recession but also stagflation, which hasn’t occurred since the 1970s.
Financial markets had their worst start of the year since 1970. Consumer sentiment is at a near 50-year low, even below its level at the depths of the Great Recession. Manufacturing output and home construction are declining. Taking a broader view of economic indicators beyond just GDP gives a stronger indication that the nation is in a recession.
Finally, the labor market is a lagging indicator. Employers generally don’t stop hiring and start letting go of employees until after recessions are underway. For small businesses, America’s job-creation engine, laying off employees is a last resort and one they won’t check into until they have no other choice. “You’re getting companies that are saying, ‘OK, let’s wait and see,’” economist Susan Sterne told The Wall Street Journal. “The uncertainty is higher.”
Unfortunately, Democrats seem intent on making this nascent recession worse. Yesterday, Senate Democrats reportedly came to a deal to raise taxes on American small businesses. A small business tax increase would make it more difficult for entrepreneurs to scale and grow, reducing small business supply when it’s desperately needed to help overcome inflation.
Such a tax hike would reduce Main Street vitality and make it harder for small businesses to compete with their big business counterparts. The proposal is just the latest installment of the Democrats’ war on small businesses.
To get us out of this recession quickly, the Biden administration and Congress must reverse course. That means committing to ending reckless spending that fuels inflation, eliminating radical green policies that reduce supply and increase prices and making the Tax Cuts and Job Act permanent rather than pursuing tax hikes.
“Additional job growth from this strong position will be slower,” said the White House today. “That is not a bad thing, because our economy should move to stable growth for the years ahead.”
The Biden administration is correct that job creation will slow but not for the reason it suggests. Stable growth is a pipe dream under this administration, whose bad policies have generated a recession.
Alfredo Ortiz is president and CEO of Job Creators Network.