Biden insists US economy ‘going to be fine’ after stock market plummets amid reports of continued inflation

Unemployment remains low, the president said

President Joe Biden says that Americans shouldn’t worry about Tuesday’s stock market drop, arguing things are “going to be fine” despite continued reports of higher-than-expected inflation.

“The stock market doesn’t necessarily reflect the state of the economy, as you well know,” Mr Biden told reporters in Delaware. “The economy is still strong.  Unemployment is low.  Jobs are up.  Manufacturing is good. I think we’re going to be fine.”

The stock market took a dive earlier in the day after the release of a fresh Consumer Price Index report that showed inflation remains high, with its sample of household goods and services costing 8.3 per cent more than a year earlier.

The news caused the S&P 500 to drop by 4.3 per cent, the Dow Jones Industrial Average to drop 3.9 per cent, and the Nasdaq Composite to drop 5.2 per cent, CBS News reports.

The declines marked the Dow’s worst single day since June 2020.

Major companies like Facebook-parent Meta and computer graphics chip maker Nvidia saw even bigger drops in stock price.

“We are not out of the woods yet,” Luke Tilley, the chief economist at Wilmington Trust, told The New York Times. “We can’t even see the edge of the woods from here.”

Job growth remains good, despite the high inflation. According to the most recent Labor Department jobs report, unemploytment sits at 3.7 per cent, up from 3.5 per cent in July.

“We see labour force participation coming back and that’s a good thing,” said AnnElizabeth Konkel, senior economist at Indeed, told the Washington Post. “If we have increasing participation but not all people have a job yet, that means unemployment will rise. My assumption is these people back to participating will be able to find jobs quickly.”

In August, the US economy added 315,000 jobs, the latest in 20 straight months that added more than 200,000 new positions.

Mr Biden celebrated the numbers earlier this month in comments at the White House.

“The great American jobs machine continues its comeback,” he said. “American workers are back to work, earning more [in] manufacturing, building an economy from the bottom up and the middle out. With today’s news, we have now created nearly 10 million new jobs since I took office.”

Still, the inflation report suggests the Federal Reserve’s recent moves to raise interest rates and slow borrowing haven’t yet had their full desired impact.

“Inflation remains hot, financial conditions have seen some improvement, and the labor markets are humming along,” Neil Dutta, head of US economics at Renaissance Macro, said in a research note following the CPI report. “If the goal is to slow things down and create some pain, the Fed is failing by its own standard.”

Later this month, the Fed will meet to consider further raising rates.