Biden and Trump Joust Over Jobs Report

Here’s what else is happening and, since tomorrow is Star Wars Day (May the 4th), may the force be with you.

Strong but Not Hot: Job Market Downshifts in April

The U.S. labor market showed signs of slowing in April, as employers added 175,000 people to their payrolls and the unemployment rate ticked up to 3.9%, according to government data released Friday. The results came in below expectations of 240,000 jobs gained and reflected the smallest increase in six months.

Wage growth cooled a bit, too, as average hourly earnings rose 3.9% on an annual basis, a drop from the 4.1% annual rate recorded a month earlier and slightly below expectations.

Still, the labor market continues to show signs of strength, even as it cools. "The labor market is strong but decidedly not hot," economist Elise Gould of the Economic Policy Institute wrote on social media. "In today's release, we see job growth solid for April (+175k), in excess of break even levels (~125k)."

Former Obama administration economic adviser Jason Furman said the numbers are close to ideal in the current environment. "Pretty much a goldilocks job report," Furman wrote. "175K jobs is respectable at any time and in the context of strong prior months so a ~250K monthly average even more so."

The Fed is watching: The combination of softening and continued growth is likely being well-received at the Federal Reserve, where central bankers are looking for signs of reduced inflationary pressure.

"The more jobs reports you get like this where they’re solid but it’s clearly moving back into something that looks like pre-Covid, the more confident we can be that the economy is not overheating," Austan Goolsbee, the president of the Federal Reserve Bank of Chicago, told Bloomberg.

The report raised hopes on Wall Street that the Fed could cut interest rates as soon as September, a scenario that was looking less likely after recent economic data indicated persistent inflationary pressure in the economy.

"If payrolls and wages continue to slow over coming months, then rate cuts are likely to come sooner rather than later," said Rubeela Farooqi, chief US economist at High Frequency Economics, per Bloomberg. "We need to see more data to understand whether this was a blip or the start of a new trend."

Very different perspectives: The White House celebrated the report, with President Joe Biden proclaiming that "the great American comeback continues."

"When I took office, I inherited an economy on the brink, with the worst economic crisis in a century," Biden said. Crediting his economic plan, he touted the 15 million jobs created during his presidency, while noting that the unemployment rate has been under 4% for a record 27 months in a row.

Biden’s likely opponent in the election this fall, former President Donald Trump, provided a very different view of things. "The job numbers just came out and they’re horrible," he said Friday morning while attending his ongoing criminal trial in New York City. "These people are destroying our country – here's another sign of it. … Our economy's bad, and now it's starting to show. So you'll see, and it'll only get worse."

As Shane Goldmacher of The New York Times notes, political mud-slinging over a monthly jobs report will likely fade from memory by the time voters head to the polls in November. But the condition of the economy, both real and perceived, will certainly affect the choices voters make, and we can expect to see more efforts to frame the economy as either "great" or "horrible" as election day approaches.

Biden Expands Health Coverage to DACA Recipients

The Biden administration announced Friday that it is expanding access to health insurance for immigrants covered by the Deferred Action for Childhood Arrivals (DACA) program.

"Thanks to the Biden-Harris Administration’s actions, today’s final rule will remove the prohibition on DACA recipients’ eligibility for Affordable Care Act coverage for the first time, and is projected to help more than 100,000 young people gain health insurance," the White House said in a statement.

DACA recipients will be eligible to apply for coverage through HealthCare.gov and state-based Obamacare marketplaces starting in November.

"The Biden administration’s move comes during an election year in which immigration has become a salient issue, and it stands in sharp contrast to former president Donald Trump’s efforts to curtail protections for DACA recipients," The Washington Post’s Amy B Wang reported.

Biden Admin Loosens Rules on EV Tax Credits

The Treasury Department on Friday finalized new rules that could make more electric vehicles eligible for tax credits of up to $7,500 under the 2022 Inflation Reduction Act.

The new regulations give carmakers more time to comply with new limits on where they can source battery minerals. Tom Krisher and Matthew Daly of the Associated Press explain:

Critics slammed the final rule as a giveaway to China and a loophole that undermined the law’s intent of building up domestic supply chains. "It’s outrageous and illegal," Democratic Sen. Joe Manchin of West Virginia said in a statement that accused the administration of "effectively endorsing ‘Made in China.’"

Proponents argue that the concession to automakers simply makes sense as part of a long transition to EVs.

"The EV transition requires nothing short of a complete transformation of the U.S. industrial base. That’s a monumental task that won’t – and can’t – happen overnight," John Bozzella, CEO of the Alliance for Automotive Innovation, an trade group representing major carmakers, said in a statement. "The Treasury rules appear to recognize the realities of the global supply chain by providing some temporary flexibility in terms of where the critical minerals in EV batteries can be sourced. That’s helpful as more automotive supply chains and battery production is localized to the U.S. and our allies."

The final rule could make more vehicles eligible for tax credits over the next couple of years. Bozzella’s group says that of the 114 EV models now sold in the United States, only 22 qualify for the Inflation Reduction Act credit and just 13 are eligible for the full $7,500 value.

Why it matters: The new rule, which comes amid a dramatic slowdown in sales of electric vehicles, could have implications for car buyers, climate change and the U.S. economy.

"If the Biden administration moves too quickly to choke off Chinese supplies, it could miss its target for half of new cars to be zero-emission by 2030," Maxine Joselow writes at The Washington Post. "Too slowly, and the United States could cede competitiveness in the EV market to a strategic rival for decades to come."

Is it time to tax the billionaires? Writing in The New York Times on Friday, economist Gabriel Zucman, who teaches at the University of California, Berkeley and the Paris School of Economics, says that recent advances in tax and wealth analysis suggest that the superrich are avoiding taxes at an unprecedented rate.

"Historically, the rich had to pay hefty taxes on corporate profits, the main source of their income. And the wealth they passed on to their heirs was subject to the estate tax," he writes. "But both taxes have been gutted in recent decades."

The chart below, which records the plunging effective tax rate for the wealthiest over time, shows the effects of that gutting. Zucman argues that the solution is a minimum tax on those at the very top of the economic ladder — a tax that would include unrealized capital gains. That would be a major lift politically in the U.S. and elsewhere, but if successful, it would generate hundreds of billions of dollars in tax revenues.

"The idea that billionaires should pay a minimum amount of income tax is not a radical idea," Zucman says. "What is radical is continuing to allow the wealthiest people in the world to pay a smaller percentage in income tax than nearly everybody else."

Fiscal News Roundup

• U.S. Economy Adds 175,000 Jobs in April, a Hiring Slowdown – New York Times
• The Fed Is Looking for a Job Market Cool-Down. It Just Got One. – New York Times
• Yellen Says Fundamentals Still Point to Slowing Inflation – Bloomberg
• Biden and Trump Tussle Over the Economy With the New Jobs Report. – New York Times
• Biden’s EV Tax Credit Rule Offers Big Concession for Automakers – E&E News
• Manchin Blasts Leeway in Biden’s EV Tax Credit Rule: ‘Outrageous and Illegal’ – The Hill
• Why Johnson Is Stuck With Threats to End His Speakership – Politico

Views and Analysis

• Still No Stag and Not Much Flation – Paul Krugman, New York Times
• Why Today’s Inflation Rate Might Be Worth Keeping – Eduardo Porter, Washington Post
• The Perils of the Fed’s Vast Bond Holdings – Jeff Sommer, New York Times
• New Bill Seeks to End Drug Shortages – David Dayen, American Prospect
• Government Remains Essential for the Nation’s Financial Stability and Prosperity – Sidney A. Shapiro and Joseph Tomain, The Hill
• Covid Vaccine Side Effects: 4 Takeaways From Our Investigation – Apoorva Mandavilli, New York Times