U.S. Markets closed

Strong dollar a headwind for economic growth: Fmr. WH adviser

The economy has added more than 1.5 million jobs in the last six months, and the unemployment rate has fallen to 5.4%, down from 5.8% in November. But recent gains in the economy have not necessarily made their way to the middle class, and according to former Chief Economic Adviser to Vice President Biden, Jared Bernstein, there is at least one factor that could cause that trend to continue in the near term.

“The one headwind by the way is that the strong dollar really does make it tougher for our manufacturers to export,” he said. “It raises the cost of our goods in export markets and lowers the cost of other competitors' goods in our markets and so the trade deficit could end up being a bigger drag on growth than it is right now.”

In fact, the trade deficit jumped to $51.4 billion in March, the highest level since October 2008. The strong dollar contributing to the gap by hurting U.S. exports. 

Asked what the economy will look like on Election Day 2016, Bernstein says, “The macro economy will be solid, whether or not it will reach folks is another question.”

The issue of income inequality has broken through to the point that even Republican contenders for the White House have added that hot button phrase to their talking points. That may be a positive step toward addressing the issue.

But while the macro economy has shown signs of progress, one critical area continues to lag: income. As more people have returned to work in the last year and a half, income has ticked up more than 3%, but the fact remains that real income is still 3% below where it was in 2007 before the recession.

So now that both parties are discussing income, what can be done to address it?

Bernstein says wages are only part of the equation. “Raising the minimum wage is something that I think helps at the very bottom,” he says. “I think that you need to be willing to use fiscal policy to invest in, say, infrastructure; that will actually both help on the macro side in terms of improving the quality of our productive infrastructure, but also help in terms of job creation.”

More from Yahoo Finance

YF Exclusive: Henry Paulson on biggest economic risk for future generations

Look for a hiring slowdown, says EY CEO

Obama's trade deal won't help the economy much: former White House economist