This one is for @SwampRayder . He is challenged when it comes to understanding detailed and complex economic data. Hope this helps you and your fellow minions on the left.
Which President ‘Created’ More Jobs?
It all depends on how you count. But the raw figures that Obama’s supporters tout are highly misleading.
By
DOUGLAS HOLTZ-EAKIN
Nov. 8, 2016 7:03 p.m. ET
58 COMMENTS
President Obama, his supporters and the press regularly tout this administration’s record for “creating” jobs. As the White House announced last week, “the longest streak of total job growth on record” continued in October and “U.S. businesses have now added 15.5 million jobs since early 2010.” CNNreports that “Obama is still behind Presidents Clinton (22.9 million) and Reagan (18.1 million), but he’s left President George W. Bush (8.2 million) in the dust.”
Yet simply counting “jobs created” is fraught with flaws. Business cycle slumps are a recurring fact of life in the U.S. economy. A corollary fact is that business-cycle recoveries ensure that the economy tends toward full employment on average. This means that the number of jobs created is driven more by the economy’s trend, dictated by supply-side factors, than attempts by any administration to stimulate the economy.
Consider a stylized example. Due to population growth, over the eight years of a hypothetical president’s two terms the trend level of full employment rises from 100 million to 127 million. That’s about 3% annual growth.
ENLARGE
However, business cycles ensure that growth is never that smooth. Instead, one could imagine that the president is confronted with a sharp downturn, employment falls below trend, and very slowly recovers to full employment. In this “Weak Recovery” scenario, actual employment falls short of full employment until the very last year of the second term.
An alternative “Sharp Recovery” scenario would see the same downturn more quickly stemmed, a growth boom, and employment rising above the long-run trend before a cooling economy settles back at full employment.
A comparison of the two scenarios carries two very important lessons. Lesson One: In both scenarios the president “creates” the same number of jobs. Both begin at trend (100) and end at trend (127). But the economic records are hardly a tie, as the Sharp Recovery is clearly more desirable. Simply comparing the number of jobs created across time periods or presidents can be misleading depending on the timing of business cycles. Lesson Two: The important drivers of job growth are those factors that determine the full-employment trend, like population growth and labor-force participation.
With these lessons in mind, let’s reconsider the job records of recent two-term presidents. If one simply looks at the raw increase in payroll employment, the leader is Bill Clinton (23.2 million), followed by Ronald Reagan (16 million), Barack Obama (10.1 million—not 15 million because it does not exclude the job losses at the start of his term) and George W. Bush (2.1 million). This is the metric that supporters push in arguing that Mr. Obama is a great creationist.
But the lesson of our simple example is that the basic “opportunity” to create jobs is driven by labor-force growth. Put differently, what would job growth have been if: (a) labor-force participation was unchanged during their tenures, and (b) unemployment was always at the full-employment level. Adjusting the data (albeit in a relatively crude fashion) produces a radical reshuffling of the rankings. George W. Bush (15.8 million) jumps to the top, followed by Bill Clinton (12.1 million) and Ronald Reagan (10.1 million). Barack Obama is dead last at 8.9 million.
What is going on? First, labor-force participation is not constant. Instead, both Ronald Reagan (4.4 million) and Bill Clinton (2 million) could have more employment growth because of increased labor-force participation. In contrast, both Mr. Bush (-4.7 million) and Mr. Obama (-3.6 million) suffered jobs downdrafts because of declines in labor-force participation. Grading their economic stewardship requires disentangling declines that are policy-driven from those that would have occurred, for example, because of demographics.
Second, business cycles matter. Ronald Reagan had a strong recovery that contributed 1.4 million jobs on his watch. Bill Clinton enjoyed an early-term recovery and a business-cycle boom toward the end. His business-cycle bonus is a staggering 9.1 million jobs. Mr. Obama’s long recovery has (finally) overcome the early job losses and padded his record with 4.6 million jobs. The big business cycle loser (to the tune of -8.9 million jobs) was George W. Bush, who both began and finished his tenure with recessions.
The moral of the story is that jobs don’t tell you much about a president’s economic record. The more important dimensions are incentives to work (reflected in labor participation and hours worked), productivity growth (which shows up in wages and incomes), and overall economic growth (which shows up on the return to capital and income). Jobs are a simple, but often misleading, measure of success.
Mr. Holtz-Eakin is president of the American Action Forum and a former director of the Congressional Budget Office (2003-05).
Which President ‘Created’ More Jobs?
It all depends on how you count. But the raw figures that Obama’s supporters tout are highly misleading.
By
DOUGLAS HOLTZ-EAKIN
Nov. 8, 2016 7:03 p.m. ET
58 COMMENTS
President Obama, his supporters and the press regularly tout this administration’s record for “creating” jobs. As the White House announced last week, “the longest streak of total job growth on record” continued in October and “U.S. businesses have now added 15.5 million jobs since early 2010.” CNNreports that “Obama is still behind Presidents Clinton (22.9 million) and Reagan (18.1 million), but he’s left President George W. Bush (8.2 million) in the dust.”
Yet simply counting “jobs created” is fraught with flaws. Business cycle slumps are a recurring fact of life in the U.S. economy. A corollary fact is that business-cycle recoveries ensure that the economy tends toward full employment on average. This means that the number of jobs created is driven more by the economy’s trend, dictated by supply-side factors, than attempts by any administration to stimulate the economy.
Consider a stylized example. Due to population growth, over the eight years of a hypothetical president’s two terms the trend level of full employment rises from 100 million to 127 million. That’s about 3% annual growth.
However, business cycles ensure that growth is never that smooth. Instead, one could imagine that the president is confronted with a sharp downturn, employment falls below trend, and very slowly recovers to full employment. In this “Weak Recovery” scenario, actual employment falls short of full employment until the very last year of the second term.
An alternative “Sharp Recovery” scenario would see the same downturn more quickly stemmed, a growth boom, and employment rising above the long-run trend before a cooling economy settles back at full employment.
A comparison of the two scenarios carries two very important lessons. Lesson One: In both scenarios the president “creates” the same number of jobs. Both begin at trend (100) and end at trend (127). But the economic records are hardly a tie, as the Sharp Recovery is clearly more desirable. Simply comparing the number of jobs created across time periods or presidents can be misleading depending on the timing of business cycles. Lesson Two: The important drivers of job growth are those factors that determine the full-employment trend, like population growth and labor-force participation.
With these lessons in mind, let’s reconsider the job records of recent two-term presidents. If one simply looks at the raw increase in payroll employment, the leader is Bill Clinton (23.2 million), followed by Ronald Reagan (16 million), Barack Obama (10.1 million—not 15 million because it does not exclude the job losses at the start of his term) and George W. Bush (2.1 million). This is the metric that supporters push in arguing that Mr. Obama is a great creationist.
But the lesson of our simple example is that the basic “opportunity” to create jobs is driven by labor-force growth. Put differently, what would job growth have been if: (a) labor-force participation was unchanged during their tenures, and (b) unemployment was always at the full-employment level. Adjusting the data (albeit in a relatively crude fashion) produces a radical reshuffling of the rankings. George W. Bush (15.8 million) jumps to the top, followed by Bill Clinton (12.1 million) and Ronald Reagan (10.1 million). Barack Obama is dead last at 8.9 million.
What is going on? First, labor-force participation is not constant. Instead, both Ronald Reagan (4.4 million) and Bill Clinton (2 million) could have more employment growth because of increased labor-force participation. In contrast, both Mr. Bush (-4.7 million) and Mr. Obama (-3.6 million) suffered jobs downdrafts because of declines in labor-force participation. Grading their economic stewardship requires disentangling declines that are policy-driven from those that would have occurred, for example, because of demographics.
Second, business cycles matter. Ronald Reagan had a strong recovery that contributed 1.4 million jobs on his watch. Bill Clinton enjoyed an early-term recovery and a business-cycle boom toward the end. His business-cycle bonus is a staggering 9.1 million jobs. Mr. Obama’s long recovery has (finally) overcome the early job losses and padded his record with 4.6 million jobs. The big business cycle loser (to the tune of -8.9 million jobs) was George W. Bush, who both began and finished his tenure with recessions.
The moral of the story is that jobs don’t tell you much about a president’s economic record. The more important dimensions are incentives to work (reflected in labor participation and hours worked), productivity growth (which shows up in wages and incomes), and overall economic growth (which shows up on the return to capital and income). Jobs are a simple, but often misleading, measure of success.
Mr. Holtz-Eakin is president of the American Action Forum and a former director of the Congressional Budget Office (2003-05).
