President Biden has an enviable problem: The economy under his watch is doing a lot better than voters give him credit for.
In the latest update of the Yahoo Finance Bidenomics Report Card, Biden’s grade on the economy rose from B+ to A-. This isn’t our opinion. It’s what the numbers tell us. We developed this methodology at the beginning of the Trump administration, with the help of Moody’s Analytics, and we’ve kept it in place for Biden. We determine each president’s grade by tracking six economic indicators back to the 1970s and rating how the current president compares with the prior seven at the same point in their first terms, going back to Jimmy Carter. (Here’s our full methodology.)
Of the eight presidents, Biden gets the highest marks for the total number of new jobs created since he took office, and also for real GDP growth per capita. Biden also gets top marks for the increase in exports during his presidency, although that data only goes back to 1993, so he’s the best of five presidents.
Biden gets second-best marks for the number of new manufacturing jobs, and for gains in the S&P 500 stock index. His only sub-par number is on average hourly earnings, where he ranks second-last.
Much of this robust economic performance represents the sharp snapback from the COVID recession in 2020—and has little to do with Biden policies. The American Rescue Plan Biden signed in March of 2021 contributed a bit to GDP growth, and probably to job gains, but Biden would probably score just as well without it. Most of the stimulus that jolted the economy out of a deep downturn came from fiscal stimulus Congress passed in 2020 and from Federal Reserve magic. Biden simply came into office at the right time.
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Few consumers would give the economy an A-, even though it’s doing very well by many metrics other than ours. That’s because of inflation and COVID. Inflation is now running at 7% and forcing millions of families to pay more for rent, food, gas and home heating. COVID is just a never-ending drag, as the third year of the pandemic draws nigh and Americans continue to struggle with virus fears, disrupted school schedules and masking fatigue. Even if the economy is booming, we’re not back to normal, which is why consumers are gloomy and Biden’s approval rating has plummeted to the low 40s.
Can the economy really thrive with inflation at 7%? Probably not. That suggests one of two things: Either our Bidenomics grade is temporarily biased to the upside and will soon decline, or inflation will fade and Americans will really start to feel like they’re living in a boom. We didn’t include inflation as one of our indicators in the presidential report card for a couple reasons. For one, when we created the the Trump Report Card in 2017, there had been no persistent inflation for more than 30 years and it didn’t seem like a metric that would change much, or tell us anything useful.
We also knew that if inflation did become a problem, it would eventually show up in other indicators. Inflation erodes consumer purchasing power and depresses growth, which would cut into GDP and employment. That hasn’t happened yet in 2022, and economists aren’t sure it will. Most forecasts call for solid real GDP growth this year of 4% or so (adjusted for inflation), with the unemployment rate going down rather than up. Still, it seems unlikely that strong growth and high inflation can peacefully coexist for long.
This is a much better problem for Biden than if the economy were depressed or unemployment were stubbornly high. There’s a good chance inflation will slowly fade as COVID disruptions bring supply and demand back into balance, especially for goods such as cars and appliances. Americans, meanwhile, are learning to live with COVID, whose ravages decline as more people get vaccinated or survive an infection.
Biden would be making a mistake if he tried to convince voters they’re better off than they feel. Inflation can generate intense financial pressure families feel every time they pay a bill. You can’t persuade people those pressures aren’t real, and they’ll resent you if you try. Better for Biden to acknowledge the problem and highlight everything he’s trying to do about it. At some point, some voters might believe him.
As for COVID, the Omicron variant is fading and warmer spring weather may bring a further reprieve. The surprising creation of 467,000 new jobs in January—during the peak of Omicron—seems to be evidence that the U.S. economy is beginning to power through COVID outbursts instead of battening down. If that trend continues or accelerates, who knows, Biden’s grade might go even higher.
Rick Newman is a columnist and author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips.
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