(Reuters) – If the Federal Reserve can steer the U.S. economy to a ‘soft landing‘, as seems to be the view gaining traction among economists and financial markets right now, President Joe Biden’s 2024 re-election hopes will likely rise.
The strength of that boost, however, may hinge on the relative degree to which unemployment rises and inflation falls as the economy slows.
What would constitute a ‘soft landing’? Inflation nearing the Fed’s 2% target, the economy skirting recession or only experiencing a mild downturn, unemployment rising but staying comfortably below 5%, and Wall Street continuing to eke out positive earnings growth.
Most observers would consider that a benign scenario after 500 basis points of rate hikes since March last year – the Fed’s most aggressive hiking cycle in four decades – and the post-pandemic surge in inflation and unemployment to multi-decade peaks.
For Biden, it could be better than just benign, because from an approval standpoint, he needs all the help he can get. Not only are his current approval ratings historically low, they are particularly poor given that unemployment is at its lowest in more than half a century.
Only twice since the 1940s – during the Korean War at the end of Harry Truman’s administration in 1951 and 1952 – have presidential approval ratings been lower with unemployment below 4%, according to analysis from Bank of America published in May.
This is less of an anomaly when you remember how high annual inflation has been since the pandemic – a 41-year peak above 9% on a headline basis, and still well above target. Core inflation remains even stickier.
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Source: www.reuters.com
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