The Biden economy is still doing okay, but there was a notable deterioration from April to May in the Yahoo Finance Bidenomics Report Card.
President Biden’s grade on the economy dropped from A- in April to B in May, because of the tumbling stock market and a dip in wages. Yahoo Finance uses data provided by Moody’s Analytics to measure the president’s performance on the economy in six areas, compared with seven prior presidents at the same point in their term, going back to Jimmy Carter in the 1970s. We created the presidential report card when Donald Trump took office in 2017 and continued when Biden became president last year.
Compared with prior presidents, Biden has the top marks on total employment, GDP growth and exports. That’s not surprising, given that Biden took office as the economy was rebounding from the sharp but brief COVID recession. Even with the first-quarter decline in GDP, Biden still ranks first in growth per capita. Biden ranks second for growth in manufacturing employment, which was higher only under Jimmy Carter.
Biden ranked second-best for stock market returns in April, but that has fallen to fourth-best amid the recent stock-market selloff. The S&P 500 stock index is still up by about 8% since Biden took office, but that’s lower than the S&P’s performance under Donald Trump, Barack Obama and George H. W. Bush at the same point in their presidencies.
Biden’s worst marks are on average hourly earnings, where he ranks last out of eight presidents. Nominal wage growth under Biden has been strong, but we adjust for inflation. By that measure, real wages have fallen by about 2% since Biden took office.
In fact, the biggest threat to the Biden economy is inflation, now running at a painful 8.5%. We did not include inflation as one of the six metrics in our report card for a couple of reasons. When we developed the methodology in 2017, inflation hadn’t been a problem in nearly 40 years, and we didn’t think it would vary much or tell us much about the economy. We also felt inflation would show up in other metrics if it did become a problem — which it has, in Biden’s poor earnings numbers.
If inflation becomes serious enough to cause a recession, that would also show up in declining GDP and employment numbers. The Federal Reserve has begun raising interest rates to tamp down inflation, and most economists don’t yet foresee a recession. GDP fell by 1.4% in the first quarter, but Moody’s Analytics foresees annualized growth of 3.6% in the second quarter and 2.8% for the full year. Russia’s invasion of Ukraine and the resulting surge in energy and food prices are wild cards that could make a recession more likely if price hikes persist, or produce a burst of optimism is there’s some kind of resolution.
A B economy is still pretty good. President Trump ended his presidency with a C grade, due to steep job losses and a contraction in GDP in the aftermath of the COVID pandemic. President Obama ended his first term with a B- economy, hobbled by weak employment and GDP growth. Biden is doing better than both, for now.
Consumers don’t feel it, however. Consumer confidence is at a 10-year low and far below pre-pandemic levels. The gathering gloom coincides with the onset of inflation last year, and doesn’t reflect a hot job market or near-record-low unemployment of 3.6%. Biden’s approval rating has taken a hit, falling from 56% when he took office to about 42% now.
For what it’s worth, Biden’s grade on the Yahoo Finance report card is more likely to improve than to decline further. A single tick upward in earnings, stocks or manufacturing employment would put Biden in the B+ range. The most likely way for that to happen would be a modest improvement in earnings, a drop in inflation (which could indirectly boost earnings) or a robust stock market recovery. All would be welcome.