President Biden takes office

22nd February, 2021

Politics and economics were intertwined in the US during January as President Joe Biden took office. America’s 46th President has inherited a faltering economy, a huge government debt, a coronavirus pandemic that continues to spread and – perhaps paradoxically – a booming stock market. During January, the technology-rich Nasdaq Index hit a new all-time high, ending the month 1.4% higher. Meanwhile, the Dow Jones Industrial Average Index fell by 2%, while the S&P 500 Index declined by 1.1%.

The US economy lost 140,000 jobs during December, representing its first net job losses since April 2020, with the leisure and hospitality industries particularly badly affected. 10.7 million people remain out of work and, while this number is much lower than its April 2020 high of 23.1 million, it is still almost double its pre-pandemic level of 5.7 million. Having fallen in December, US consumer confidence improved “moderately” overall during January, according to the Conference Board’s Consumer Confidence Index, although consumers’ sentiment towards their current situation remained weak.

Following riots at the US Capitol early in January, the House of Representatives voted to impeach former President Donald Trump for inciting violence. His trial is scheduled to take place during February. This is Mr Trump’s second impeachment, following a previous trial early in 2020.

Ahead of his inauguration, President Biden announced his US$1.9 trillion “America Rescue Plan”, which includes an increase of US$1,400 in stimulus payments to most households, and extensions to unemployment benefit and rental assistance. However, the package has yet to get past Congress.

President Biden appointed former Federal Reserve (Fed) Chair Janet Yellen as the country’s first female Treasury Secretary. However, the Republican Chairman of the US Senate Committee on Finance warned Ms Yellen that it was “not the time to enact a laundry list of liberal structural economic reforms”. Commenting on President Biden’s rescue bill, Secretary Yellen observed: “Neither the President … nor I propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big”

The International Monetary Fund (IMF) upgraded its forecast for US economic growth this year from 3.9% to 4.3% and expects the economy to return to pre-pandemic levels of activity by the end of this year.

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