Economic analyst James Pethokoukis talks President Biden's economic balancing act ahead of election

Meantime, the April jobs report coming in underestimates today. the US added 175,000 jobs last month, compared to estimates of 240,000. This comes as President Biden gears up for reelection. As jobs and the overall economy remains strong. Inflation remains top of mind for voters, according to the latest survey from CNBC. Three and five small business owners say high inflation and economic growth are the number one issue this November. But how can Biden meaningfully slow inflation with meaningfully slowing the economy? That’s the trade off here, according joining me now, economic analyst at the American Enterprise Institute, Jimmy Petakoukas. He is also a CNBC contributor. Jimmy, President Biden is in a box here, isn’t he? I mean, first of all, he’s not really in control, so he doesn’t have any any say over what happens here because it’s really up to the Fed. Secondly, you know, you’ve got the economy slowing, which you think would be good for inflation, but a slowing economy is bad for his voters. So what’s he going to do? Well, if I were President Biden, I’d be more than willing to accept slowing job growth and a tick up in the unemployment rate for a situation where it looks like the economy is headed for a soft landing, meaning inflation is falling toward the feds target. You’re not going to get a recession, you’re not going to get a meaningful rise in unemployment and there’s a new economic story. And in that case, the new economic story would be the pandemic and inflation, all that’s behind us. We have a soft landing, the economy start growing in the future and we can talk about that instead of inflation. I mean that would be the ideal situation. Yeah. It, it feels like we basically do have a soft landing or we had a soft landing a couple of months ago and we’re kind of enjoying the benefits of that right now. But voters don’t seem to be recognizing that or appreciating it, and especially because of what they’re seeing in terms of inflation, as you’ve pointed out, they remember when costs, we’re so much higher, so much lower than they are now. And these high costs really influencing people, right as Biden is going to go into his summertime campaigning season in a presidential re elect, that’s a dynamic that no administration wants to face. And you wonder if voters are simply not going to hear what is, you know, on the merits, good economic news from this president because they’re not feeling it because of the psychological shock of that inflation they’ve experienced over the past couple years. Right. Well, you know, there there’s nothing he can do about that. I mean, people are going to remember that. So what he needs is something substantial that says the economic situation is different. It’s obvious people are talking about it. What the president does did not need from the Fed was Chairman Powell saying hire for longer. That’s not the story he needs. What he needs is something big and different which would be rate cuts and the odds. After today’s job report, the odds of rate cuts seem to have creeped up a little bit. I’m sure the president like earlier, the better those rates and start dropping interest rates to start dropping that’d be great for homeowners. So that’s that is a substantial economic story because if it’s true, that means the Fed has pulled off something which has rarely pulled off in the past 50 years. And that would be a different economic story that might actually breakthrough sort of the filter and the and the and the and the memories of high inflation and create a new attitude. But it it is tricky. What about the timing here, Jimmy? A lot of people looking at July maybe as the sweet spot for a Fed rate cut possibly, maybe that’s right in the thick of the summer campaign season. How does that play out for the president? Well like I said, I think the, I think the earlier the better for President Biden. Yeah, June in 15 minutes that would be great. But as you mentioned if if the when the Fed starts cutting it starts cutting rates and starts cutting in the summer or leading into the election, Donald Trump will be screaming that this is a that the Fed has picked a side, it’s picked Joe Biden and that, that that if he should win the Fed’s independence needs needs to be curtailed. That is going to be a massive economic slash political issue when that starts happening. So they could have long term effects if Donald Trump wins.