WASHINGTON — President Biden has many worries: wars in Ukraine and the Middle East, migrants surging across the southern border, a looming government shutdown, and, as he addressed Friday, the fate of American democracy.
The US economy might no longer be near the top of the list.
Defying predictions a year ago that the nation would be in a recession right now, the economy enters 2024 on a roll. An unexpectedly strong jobs report Friday is the latest development fueling optimism among Democrats on an issue that polls show is the most important to voters — yet one on which Biden continues to have a dismal approval rating.
“You’d be hard pressed to have come up with a better economic story than the one that we’re witnessing right now coming out of a pandemic,” said Representative Richard Neal, a Massachusetts Democrat.
Inflation has come down significantly from a four-decade high, wages are rising, gas prices are falling, consumer confidence is up, mortgage rates are down, and the stock market has been booming.
“The economy’s performing well; 2023 was a really good year,” said Mark Zandi chief economist at Moody’s Analytics.
The economy is expected to continue performing well in 2024, although not quite to the level of last year. Overall growth and job gains are expected to slow, not to recession levels, but enough that the Federal Reserve recently indicated it could cut interest rates in the coming months. While consumers are feeling better about the economy, confidence is still well below pre-pandemic levels.
Prices for gas, groceries, and other staples remain significantly higher than when Biden took office and Republicans continue to hammer him for it. On Friday, Donald Trump, the front-runner for the party’s presidential nomination, released a new TV ad slamming Biden for his economic performance.
“Trump: He’ll make America’s economy great again,” the ad concludes.
A year ago, many economists feared the nation was headed into recession — generally defined as at least six months in which the economy shrinks — as the Fed hiked interest rates sharply to try to reduce demand and push down inflation. Historically, such an effort triggers a recession because the higher borrowing costs lead businesses and consumers to cut back on their spending.
But inflation fell last year without stalling the economy, the difficult “soft-landing” that Fed officials were seeking. The annual consumer price index was 3.1 percent in November, the latest available data. That was down from 7.1 percent a year earlier and well off the four-decade high of 9.1 percent in June of last year.
The good news continued Friday. The Labor Department reported the nation gained 216,000 jobs in December, well above economists’ expectations. The unemployment rate held steady at 3.7 percent and now has been below 4 percent for nearly two years, the longest stretch since the late 1960s. And wages increased more than expected — 4.1 percent for the year — continuing their recent trend of outpacing the growth in prices.
“We’re seeing a robust economy that is growing and generating positive outcomes for the American people,” said C. Kirabo Jackson, a member of the White House Council of Economic Advisors. He noted the sharp increase in the two leading measures of consumer confidence last month as evidence that “Americans are now starting to feel the benefits of the strong economy.”
Dana Peterson, chief economist at the Conference Board, a private research group that produces one of those measures, said consumers were more confident in the economy last month because they’ve seen price growth slow, mortgage rates decline, and Federal Reserve officials signal they were done raising interest rates to lower inflation.
“They’re getting some relief. Yes, prices are still rising, but not as aggressively as they were a year ago, or even earlier in 2023,” she said. “So I think all those things combined, the consumers felt better in December.”
Still, the index only increased to its July level, which was not particularly high. The same dynamic played out with the other leading consumer confidence measure from the University of Michigan, said Joanne Hsu, who directs that survey.
“It’s not that people are feeling like we’re back to normal … but we are in a much better situation than we were last year,” she said. “Our fears have not come to pass.”
Consumer confidence was helped by lower gas prices, which spiked after Russia’s invasion of Ukraine to just over $5 a gallon in June 2022. This week, the average price for a gallon of regular gasoline was $3.09 nationally and $3.19 in Massachusetts, according to AAA, as US oil production has reached all-time highs despite recent cutbacks by OPEC nations.
“The US is now producing record amounts of crude oil. That is absolutely a key player in why oil prices have declined in recent months,” said Patrick De Haan, head of petroleum analysis for price-tracking firm GasBuddy. He forecasts gas prices to be about the same level on Election Day in November, after the usual seasonal increases starting in the spring through summer as Americans drive more and many states require more expensive summer gas blends to reduce emissions.
But gas prices could jump if there are global shocks, such as a wider Middle East war that affects oil producing nations, De Haan said. The same goes for the broader economy.
Biden and administration officials have been trying to tout the economic improvements and link them to the president’s policies, which they’ve branded “Bidenomics.” But his job approval on the economy has remained below 40 percent in most polls. Asked by reporters on Dec. 23 for his outlook on the economy this year, Biden said, “All good. Take a look. Start reporting it the right way.”
Neal said Biden and the Democrats need to point out the economic improvements and tie them to legislation they’ve enacted during his presidency, like the bipartisan infrastructure law and the Inflation Reduction Act.
“I think we’re waiting for perception to catch up with reality,” Neal said. “We’ve got a very good story to tell and I think we need to do a better job of telling it.”
Jim Puzzanghera can be reached at jim.puzzanghera@globe.com. Follow him @JimPuzzanghera.