US jobs numbers deal setback to Biden’s $1.9tn rescue plan

Securing support for more spending plans set to be a significant challenge for the president

When US president Joe Biden unveiled his $1.9 trillion American Rescue Plan in February, Republicans accused the new president of profligacy.

"Wildly expensive" and "largely unrelated to the problem", quipped Senate minority leader Mitch McConnell, vowing to fight it "every step of the way".

Democrats were nonplussed. Instead they used the contentious budget reconciliation procedure technique to push through the legislation in the Senate without the need for Republican support.

The package was signed into law by Biden in March and contained a range of measures including $1,400 cheques sent directly to Americans, expanded child tax credits and improved unemployment benefits.


Further, an emboldened Biden followed through with an infrastructure plan comprising two strands – $2.3 trillion for traditional infrastructure projects like roads, bridges and broadband, and $1.8 trillion focusing on more intangible aspects of the economy like childcare and education.

Though the infrastructure plan has yet to be approved in Congress, together the three spending packages represent one of the biggest investments in the US economy in years.

But on Friday, Biden’s economic agenda confronted its first serious hurdle with the publication of disappointing jobs figures. Economists were taken by surprise as the monthly numbers showed a much lower level of employment growth than had been expected.

The US economy added a modest 266,000 jobs in April, compared to 770,000 in March, undermining previous signs that the US economy was poised to rapidly bounce back as the country reopens from the coronavirus pandemic.

The unsettling figures sent Democrats scrambling for an explanation, and gave Republicans more fuel for their argument against the $1.9 trillion American Rescue Plan.

Many had argued that the economy did not need the level of stimulus Biden proposed. They had also warned that the unemployment benefits – an extra $300 weekly bonus payment in addition to regular state unemployment benefits – were too generous and would disincentivise work.

For critics of the Biden plan, Friday’s unemployment figures appeared to bear this warning out. There have been widespread reports in recent weeks that some businesses are finding it difficult to hire workers, particularly in states that are well advanced in their opening plans like Florida.

In some cases, employers are offering cash bonuses or education plans to entice new hires. Some Republican governors have now said they plan to cancel the $300 federal unemployment payment in their states, amid claims of worker shortages.

Unusual hit

At a press conference on Friday, Biden was on the defensive. He said that the disappointing jobs data “just underscores, in my view, how vital the actions we’re taking are”. The plan should be judged over the course of a year, “not 60 days”, he said. “We never thought that, after the first 50 or 60 days, everything would be fine.”

He also dismissed “loose talk” that Americans don’t want to work, though he said that some employers are finding it difficult to fill jobs.

Shortly afterwards treasury secretary Janet Yelen took questions at the White House. Digging down into the data, she said that the report was a little stronger than the headline numbers suggested and noted that monthly data is volatile.

She also said that other factors are affecting workers’ ability to get back to work, such as the fact that many schools have not returned to full in-person learning, with the result that many parents cannot return to work. Overall, she said the road back to economic strength will be “bumpy”.

“We’ve had a very unusual hit to our economy, and the road back is going to be somewhat bumpy. We have to expect that there are a variety of bottlenecks,” she said.

A similar message was delivered by commerce secretary Gina Raimondo on Sunday, who said that over-generous unemployment benefits were not the problem.

“It doesn’t seem to be that that is the major impediment,” she said, instead pointing to health fears concerning Covid-19, and lack of affordable childcare, which is impacting women in particular.

Asked if the administration was considering tweaking the unemployment package, however, she conceded that it was “something we are monitoring”.

Undoubtedly, Friday’s job figures were an unsettling surprise for the Biden administration. The development comes at a difficult time. This week, the president will host senior Democrats and Republicans for talks at the White House to garner support for his infrastructure plan.

Securing buy-in for more spending plans in the current climate promises to be a significant challenge for the Democratic president.