A Strong Jobs Report Friday Could Doom Biden’s $1.9 Trillion Stimulus

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President Biden might be of two minds about Friday’s employment report. Robust job growth would be good, of course, but it could undermine the rationale for the $1.9 trillion rescue package that’s the top priority of his young administration. “It could take out some of the urgency,” Michelle Meyer, head of U.S. economics at Bank of America Corp., told Rich Miller of Bloomberg News.

The unpredictability of the coronavirus pandemic’s effects has left economists unusually divided over what the Bureau of Labor Statistics will say. Two of the outfits surveyed by Bloomberg Economics, TD Securities (USA) and Wrightson Icap LLC, are expecting the BLS to say U.S. employment grew by 400,000 in January. At the other extreme, Barclays Capital Inc. and Credit Suisse Securities (USA) estimate employment shrank by 100,000—and one, Berliner Sparkasse, estimates employment shrank by 250,000.

The median forecast in the Bloomberg survey is for January job growth of 100,000, an improvement from a decline of 140,000 in December (that number is subject to revision).

Even though Covid-19 continues to take a heavy toll, there are signs of gathering momentum in the economy, aided by the $900 billion package that Congress passed in December. On Feb. 1 the nonpartisan Congressional Budget Office projected that the economy will grow 3.7% from last year’s fourth quarter to this year’s fourth quarter even if “no significant additional emergency funding or aid is provided.”

Republicans are countering Biden’s $1.9 trillion plan with a $618 billion package—one-third the amount—that shrinks relief checks to $1,000 while tightening eligibility, eliminates the increase in the federal minimum wage to $15 by 2025, and reduces aid to schools to $20 billion from Biden’s $170 billion. 

The president is hanging tough for now. He told House Democrats on Feb. 3 that he was open to tightening eligibility for stimulus checks, but not the size, $1,400. Senate Majority Leader Chuck Schumer of New York said on Feb. 3 that lawmakers and the White House were “united as one” for a large bill.

In some ways this is a replay of 2009, when Biden was the newly elected vice president and Republicans blocked President Barack Obama’s stimulus plans. That slowed the rebound from the 2007-09 recession and contributed to Democrats’ “shellacking” in the 2010 midterm elections. The lesson Biden seems to have absorbed from that episode is go big or go home, so he’s going big.

There’s certainly room for stimulus: The government can borrow cheaply, and inflation is below the Federal Reserve’s target. But whether the economy actually needs the full $1.9 trillion package right now is a separate question—one that Republicans in Congress continue to ask. That’s why Friday’s jobs report will be closely watched. 

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