Job Growth in Perspective, Part II
Last week, I posted a table showing average monthly job creation for each year from 1959 to the present (see Job Growth in Perspective, Part I). At the time, I posed the following question:
We all know that Bush is the first president since Herbert Hoover to lose jobs over the entire course of his administration. That’s clearly bad, but how bad is it?
Beyond presenting the raw data, color-coded and arranged by administration, I didn’t do much in the way of interpreting the results. So here is what stands out to me:
- Recessions happen, and their onsets are not necessarily, nor even generally, the fault of the president. Ford had two pretty bad years, 1974 and 1975, caused by oil shocks about which he could do little. Similarly, Reagan’s first two years were also quite bad for reasons largely beyond his control. On balance, when a president claims that he’s not responsible for the onset of a recession, there’s a reasonable chance he’s correct.
- The same does not apply, however, to the duration of a recession. Presidents have a number of tools at hand that they can apply, if they so choose, to shorten the rough patches: they draft the budget; their vetoes signal how much and what types of spending are allowed; they have the bully pulpit (calls for new spending or tax cuts are more compelling when made during a recession); they can also pressure the Federal Reserve to lower interest rates. While Congress has direct control over the spending, the idea that the man often called the “Leader of The Free World” lacks great power to shape spending and tax levels is laughable.
- Every administration since 1959, save this one, has wielded these tools effectively. Until the current administration, no period coded as “Poor” (orange) or “Terrible” (red) job growth — categories that collectively indicate monthly job growth in a year below 0.02% — lasted more than two years. President Bush is the only one of the last 10 presidents to have three consecutive poor or terrible job creation years in a row. In none of his first three years did Bush manage to have positive job growth; not in the private sector, and not overall. This has not happened since the eve of the Great Depression.
- In his first three years, Carter was a job-creating machine. But his final year, 1980, was bad, with job growth barely above zero. As a result, the common wisdom is that the economy was generally very bad under Carter. The truth, however, is that Carter’s worst year was better than each of Bush’s first three years.
- Are things turning around now? Is it in fact impressive that, as Bush often states, there have been “over 1.9 million jobs created since August 2003, with 13 straight months of job gains”? In fact, the historical rate of monthly job growth, in the private sector and overall, from 1959 to the present is 0.17%, which in today’s numbers would be about 185,000 workers per month. In Bush’s best year so far, 2004, he’s averaged a 0.13% monthly increase in private sector jobs and a 0.15% monthly increase in jobs overall (growth in government accounts for the difference.) The historical average is 0.17%. Stated differently, in his best year ever, President Bush’s job creation record is slightly below average.
- The period spanning Carter’s last year and Reagan’s first two, 1980-1982, looks pretty bad as well, but Bush’s job market is worse. When the economy finally recovered in 1983, the job market took off (unlike today), with job growth surging a full standard deviation above the historical average. At least with Reagan, the massive deficits actually gave a decent bang for the buck in terms of creating jobs. Once again, the President Bush has managed to make me look back fondly on Ronald Reagan’s administration.
- In terms of job creation, the 1960s really were an amazing decade, averaging 0.25% monthly job growth. As I recall, the 1960s were also a time of war. So the claim sometimes floated these days that job growth and war are incongruous is pure nonsense. In fact, I believe Franklin Roosevelt also managed to simultaneously fight a war and create a few jobs. Same goes for Truman, Ike, and Nixon.