EDITORIAL: President’s economic victory lap is a bit premature

Who could have predicted when President Joe Biden took office that his administration would soon be bragging about 8 percent inflation and gasoline at $4.50 a gallon? But here we are.

The White House last week seized on Labor Department numbers showing that inflation remained flat between June and July. “Zero percent,” the president said. Never mind that prices are 8.5 percent higher than they were a year ago.

Mr. Biden took a similar approach on gasoline prices. In July, the average price of a gallon in the United States fell below $4.50 after nearly hitting $5 in June. The president took to Twitter to pat himself on the back for saving families “those extra dollars and cents. Never mind that prices at the pump remain about 80 percent higher than when Mr. Biden took the oath of office.

That’s not to say these developments aren’t good news for the beleaguered administration — and for Americans. A one-month trend in the right direction is better than the alternative. But let’s not allow the relentless spin to make us dizzy from a lack of perspective.

The same goes for Mr. Biden’s rhetoric on jobs. July’s strong employment report showed the nation added 528,000 jobs in June and unemployment fell to 3.5 percent. The president noted that “there are more people working in America than at any point in American history.” This is true, if only due to population growth. In fact, the percentage of idle workers entering the employment market has fallen in recent months and has yet to recover to pre-pandemic levels.

This is one reason why many employers — particularly in the hospitality industry — struggle to fill job openings even after boosting wages. “The labor force is about 600,000 smaller than in early 2020,” Gwynn Guilford wrote for The Wall Street Journal this week. That means a “key part of the equation is moving in the wrong direction.”

As Ms. Guilford notes, that creates a dilemma for the Fed as it raises interest rates to attack inflation. Higher interest rates are traditionally linked to higher unemployment. But if job openings remain unfilled at an unusually high rate, “the Fed will have to work harder to reduce labor demand by raising interest rates more,” she observes, “creating a greater chance that much tighter financial conditions trigger mass layoffs and a recession.”

Mr. Biden and his economic team never saw inflation coming and took intentional steps that they had to know would boost energy prices. Redefining the word “recession” doesn’t change the fact that the nation has endured two full quarters of economic contraction despite robust job growth. A victory tour based on a month or two of “less awful” news is woefully premature.