How President Biden's economic outlook could be impacted by jobs report, bank crisis

Yahoo Finance senior columnist Rick Newman details how the April jobs report data and the ongoing bank crisis may impact President Biden's economic policy and his 2024 reelection bid.

Video transcript

- Right well sticking with jobs employers adding 253,000 new jobs in April, strong pace of hiring exceeding expectations that's marked the 13th month in a row. But what's this all mean for President Biden as he looks ahead to re-election? Yahoo Finance's Rick Newman here with this week's edition of Bidenomics. So Rick, like Akiko was just talking about prior segment here, he has a tough line to walk just in terms of the slowing growth but also wants to get inflation under control. What do you think this means for his run in two years?

RICK NEWMAN: A great jobs report for President Biden today. Obviously, employment is slowing. That's what everybody expects, and that's actually what the Federal Reserve is trying to do. And we are going to get the next inflation report next week. And most economists are saying they expect continued-- the continued downward trend in inflation. So that's all going the right direction.

I actually think the bigger developments this week were what we have seen with regard to regional banks. I mean, we had this failure and then takeover of First Republic on Monday. And you had regulators, and you had bankers, including the leaders of some of the largest banks in the country saying that's it. The problem is over, and markets did not believe them. And we saw this ongoing sell off of regional banks and then of something of a recovery late in the week today. But there's a real problem going on here.

I was out at the Milken Institute Global Conference in Los Angeles this week, Akiko I saw you there for a hot second. One of the dominant themes was not so much that we're going to have more bank failures, but that we're going to have a really tough credit crunch, which is already starting. And that is going to result from-- first of all, banks no regulations are going to get tighter, we saw regulatory reform proposals come out from the FDIC and the Federal Reserve recently. And banks are just tightening up as they think maybe a recession is coming, plus they have less money to loan.

Now, I don't know-- I don't think anybody knows how severe this credit crunch is going to be, but it is going to be a significant thing in the second half of the year, and nobody saw this coming. I mean two months ago before Silicon Valley Bank failed, nobody had credit crunch on their list of things that could go wrong in 2023. And now I think it's at the top of the list. So that makes me worry about where we're headed with the economy.

- Yeah, Rick, on that point, I mean, we talk about the regional banks, the concern isn't just about the deposits now but to your point, the credit crunch because the expectation is there's an impending type of regulatory crackdown that could potentially come because of what happened with SVB. I want to bring this conversation back to politics though, because President Biden has said he's going to run again, I hate to talk about messaging when we're so far out, but you know in his camp, they're thinking about it right now. How do you think he shapes this economic message when we've got inflation still very high levels, but he's got a very strong labor market?

RICK NEWMAN: I think you accentuate the positive. I mean, there's no way you're going to hear President Biden or probably any incumbent president say, well, things are OK right now but be ready for doom in the future, the way I'm saying it. I'm not running for election for anything, and I'm not responsible for stewardship of the economy, President Biden is. So he's going to accentuate the positive.

And the balancing act there is want you people to know the good things that are happening. And that's arguably been a problem for President Biden. I mean, we've had an extraordinarily strong labor market during his presidency, and yet, consistently, we've had confidence levels at recessionary levels. That's a bit of a puzzle. People are bummed out, and they think the economy is much worse than it is on paper.

So if you're Biden, you have to accentuate the positive. But when people are feeling pain, you have to acknowledge that. He's been trying to do that. I mean, he keeps saying that's part of his slogan finish the job, part of finishing the job is get inflation under control. So that is the message we're going to hear from him. He's going to have a problem if the economy really does hit the skids and we finally get this recession that some people have been predicting seemingly forever, which could come by the end of this year or maybe the beginning of next year.

- Yeah, I mean, you could argue there's a disconnect right now between the data and the headlines, but if that doesn't exist at some point, then to your point that that's kind of a problem for the president. Still a long way to go, Rick, I'm going to keep you busy. Rick Newman, as always, thanks so much. Have a good weekend.

RICK NEWMAN: Bye, guys.