Consumers are bummed out, but they may be underestimating the health of the economy.
Eight months into Joe Biden’s presidential term, the economy earns a robust B+ grade, according to the Yahoo Finance Bidenomics Report Card. Our report card uses data provided by Moody’s Analytics to compare the Biden economy to that under seven prior presidents, going back to Jimmy Carter in the 1970s. We did the same for President Trump, beginning in 2017.
We track six economic indicators to assess the economy as ordinary people experience it: total employment, manufacturing employment, average hourly earnings, exports, stock prices and GDP per capita. Biden gets top marks in two of those categories—employment and exports—and high marks in three other categories. The weakest Biden numbers relate to earnings, though those have improved recently.
Timing is a huge factor in every president’s economic performance. Biden took office as the coronavirus vaccines were just becoming available and the pandemic recovery was ramping up. That’s why job gains under Biden have been so strong: employers have been hiring back millions of workers they let go during last year’s sharp downturn. The 4.8 million jobs gained under Biden, in fact, are 70% more than the second-best performance, which was 2.8 million jobs gained at the same point in Jimmy Carter’s presidency.
During Donald Trump’s first 8 months as president, the economy gained 1.4 million jobs. Under Trump’s predecessor, Barack Obama, the economy lost 3.8 million jobs during the same timeframe. Again, timing: Trump took office amid a slow but prolonged recovery that continued until the Covid pandemic ended it in 2020. Obama took office during a brutal recession that had been underway for 13 months and would continue for the first four months of his first term.
Consumer confidence doesn’t reflect the relatively sound state of the economy, at the moment. Confidence rose during Biden’s first four months in office, as the vaccine rollout seemed to promise a return to normalcy. But confidence has fallen since midsummer as the Covid Delta variant kidnapped normalcy. Other pressures weighing on consumers include rising gas prices, product shortages and broader inflation worries. Our report card doesn’t track confidence directly, but other indicators would capture a collapse in confidence if it weakens underlying fundamentals.
Real GDP growth has been strong under Biden, registering the best performance since early in Jimmy Carter’s presidency. But that, too, is something of a distortion, reflecting a strong snapback after last year’s drop in output. Economists in recent weeks have been slashing their growth forecasts due to the Delta slowdown. A recession isn’t in the cards, but consumers can get gloomy when decelerating growth makes it feel like things are going the wrong direction.
Earnings under Biden started out terribly, coming in at the lowest level in three of his first five months. Earnings have picked up a bit since then, but this is yet another pandemic peculiarity. Average earnings soared in the pandemic’s early days, because lower-income workers were far more likely to lose their jobs, pushing average earnings up among those still working. Lower-income workers are returning, but average earnings remain jumpy. They might be going up as employers raise pay to attract workers, but it’s not clear if recent gains will hold.
Stocks, of course, soared after the first month of the pandemic, thanks largely to extraordinary monetary stimulus measures by the Federal Reserve. They’re still up under Biden, though the market registered bigger gains at the same point in Obama’s presidency, and in George H. W. Bush’s.
Presidents tend to get more credit or blame for the economy’s performance than they deserve. Many factors influence the economy, from international trends to asset bubbles that could brew for years before erupting. Our report card does not suggest that Biden’s policies are responsible for the direction of the economy under his watch. But voters will reward or punish Biden and his fellow Democrats as if they are, which is why we put the Biden economy in historical context.
The economy can also drift beyond any president’s ability to control it. Jimmy Carter, for instance, would have had a B+ grade, like Biden, eight months into his presidency. But by the end of his one-term presidency, inflation had eroded wage growth, output had slowed and Carter’s economic performance dropped to a C+. The Trump economy average B+ during his first year, but drooped to a C during his last, as the Covid pandemic snarled everything. Obama, by contrast, improved modestly, from a C to a B- during the same timeframe. Biden no doubt wants to improve on his former boss’s record.
Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips, and click here to get Rick’s stories by email.