The discussion of the health of the economy seems to take many different forms. My last article dealt with the progression of the economy from the Bush years through the Obama years and finishing with Trump. In it, I laid out the argument the current economy has everything to do with Trump’s policies of building strength into the current economy from a place of relative weakness or at best an erratic economy, only 1 quarter away from another recession. The current discussion centers around the Obama apologists attempts to denigrate the 2020 economy by stating high unemployment numbers in March and April as a demonstration of Trumps inability to understand the economy and do anything about it. Their talking points ignore the status of the economy in February and instead focus on high overall unemployment and the “official” recession we experienced in Q1 and Q2. They just released a reduction in jobless claims thru Sep along with a lower unemployment rate of 7.9%. After so many months of 3-4% unemployment numbers this sounds bad until you look at the April numbers of 14.2% and realize we’ve cut that number in half after only 4 full months. This is even more remarkable when you realize so many high population states still have not opened up completely, such as California, New York, New Jersey, Washington, Illinois and a few others who don’t want to open at all. Imagine how low the unemployment rate would be if they were to open up like Texas and Florida since we now have multiple effective treatment protocols.
The argument has become the current high unemployment rate. One of the favourite economic advisors the news channels like to interview, and quote is the former economic advisor under the Obama Administration, Robert Wolf. His main contention is the 12mm people currently out of work and you can’t possibly get all these people back to work with this “trickle-down economics.” According to Mr. Wolf only the rich benefit from this and it leaves nothing for the middle and lower class families. After the last debate he could be heard on any number of the interviews he gave touting Biden’s plan to get all these people back to work. However, when you look at the details you find that if it weren’t for the trickle-down economics the middle class worker would have even less. As I indicated in my last article the unemployment rate may not be such a reliable indicator. The unemployment rate was falling under Obama but then so was the job participation rate and as far as I am aware there wasn’t a mass extinction reducing the number of potential workers. Turns out they just quit counting them after a certain number of months of not being employed.
Look at the chart below and you’ll see the job participation rate beginning at the end of the Bush administration is sitting at just under 65% in Jan 2009. It continues downward until it hits a low of approx 62.5% around Jan 2016 and then increases to approx 62.8% in Jan 2017. This tells us very few people re-entered the job market once they lost their jobs. Since Trump initiated his policies of lower taxes, reduced regulations and incentivizing manufacturers to come back to the US we’ve seen a steady increase in the number of people re-entering the market. By the time the pandemic hit in February and the economy was forced to shut down the job participation rate was back up to almost 63.5% and was beginning a sharper increase. A look at the ratio of employment to population ratio shows the Obama administration was unable to recover enough to even reach the level of the Bush administration which ended at 60.5%. Trump took the employment level from Obama’s final rate of 59.5% to 61% just prior to the forced shut down in February of 2020. This would indicate the policies of Obama administration did not work even though they were talking up the economy and all the new jobs that would be created by the clean energy programs and “shovel ready” jobs the government was going to implement. Now, with Biden’s plan of higher taxes and the Biden “Green New Deal” we’ll see at the very least a continuation of sluggish anemic economy we suffered through for 8 years.
As a further illustration of this point look at the employment numbers in the next chart. Prior to the forced shut down there were 164.5 m people employed. Compare this to the number of people employed during the final months of the Obama administration, 159.7 m. This is a marked increase in employment and therefore a decrease in the money the government must distribute through unemployment. What I find even more interesting is the current Civil Labor force for August is at 160 m and the final month of Obama’s administration had only reached 159.7 m. Even with the Pandemic the Trump policies seem to be doing better for the American public than the Obama administration.
Generally speaking, it seems the press was/is having a hard time accepting the successes we are all enjoying. The latest jobs report was released yesterday, and it tells of a tremendous number of new jobs but they have been playing it down by focusing on the number of 661,000 jobs created as less than the projected number of 859,000. This actually includes 871,000 new private sector jobs and a loss of 200,000 government jobs. You can tell we are getting used to these tremendous numbers when you have to go back almost 2 decades to see increases of this magnitude. Imagine what the economy would look like if the states that are still shut down were to open up again. There are 7 states with an unemployment rate greater than 11%, California, New York, Nevada, Massachusetts, Illinois, Hawaii, and New Mexico. If these states would open up even partially and reduce their unemployment numbers, we would quickly be back to where we were in January.
The economic experts like Robert Wolf have been spinning the numbers in such a way that if you believe them without looking at all the indicators you would believe we are in worse shape than in 2016. Even with the Pandemic, the indicators show we have a much stronger economy and one that is poised to get better provided we keep the same people in office. You may not like some of the words being used by the current administration, but you can’t ignore the facts. Thanks for taking the time to read this. I hope I’ve given you a different perspective than all the spin and rhetoric being tossed around in the news today.