By Howard Schneider

WASHINGTON, (Reuters) – The Federal Reserve and Biden have set out to bring back U.S. job growth to pre-pandemic levels. This is a goal that the Federal Reserve has achieved. However, the Federal Reserve’s and Biden administrations now need to see a rebound in New England jobs and California. A potentially worrying fact for President Obama’s Democratic Party as he prepares for crucial midterm elections, and the Fed plans to increase its monetary policy.

According to data released Friday, October employment was almost 99% higher than February 2020 in the states with Republican governors. Democratic-lead states were at 96%.

Although state estimates are not always accurate, especially month-to-month, it is clear that the larger job gap in Democratic-leaning regions reflects the political divides and choices made early on in the pandemic. States of the Northeast and midatlantic tended to have more stringent measures and stay in place for a longer time than Republican-led South and West states.

In these areas, employment fell sharper and this gap has not diminished even after the recovery.

Graphic: State decline and recovery in jobs – https://graphics.reuters.com/USA-ECONOMY/STATES/jnpwexzkgpw/chart.png

While recovery is faster than people expected, the pace of recovery remains uneven. There were 10 states with more jobs than they had in February 2020. Six of those states had Republican governors. The remaining six GOP-led state had less than 1 percent of the pre-pandemic level.

Graphic: A still disjointed recovery – https://graphics.reuters.com/USA-ECONOMY/JOBS/jnvwexybwvw/chart.png

The level of jobs alone doesn’t tell the full story, and on key measures like the overall employment-to-population ratio – considered a more complete measure of job market health than the unemployment rate – Republican strongholds like Texas and Florida remained well below levels seen before the pandemic crisis.

The job market is a challenge to Biden. States like New York, California, and other important Democratic states are still at 5% of their pre-pandemic peak. Political battlegrounds such as Pennsylvania, however, remain lagging.

It appeared that until recently, the Fed had been intent on keeping monetary policies loose and borrowing rates easy as long as necessary to regain those jobs.

This goal may be at odds with Fed’s second aim of stabilizing prices. Fed policymakers are being challenged by an inflation run that has prompted them to talk about a quicker move towards tighter policies. It could lead to slower job growth, which would impact Biden’s chances of becoming a politician.

These dynamics are now likely to play a central role in Biden’s choice on the Fed top spot. The term of current Chair Jerome Powell expires in February. Biden will make a decision on his replacement or reappointment within the week, probably with Fed Governor Lael brainard.

High inflation rates, which have been higher than expected, are affecting Biden’s approval rating and increasing the importance of his central bank chief selection.