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Tuesday, 29 July 2014

Jobs blues – and reds

Obama job adds match Bush, Clinton but not Reagan

Thirty months after the U.S. jobs nadir, employment has risen by 3.1 percent, according to Friday’s report for August. That’s roughly in line with the post-recession record of the last 2-1/2 presidents - but far short of Ronald Reagan’s 9.8 percent jobs increase. The picture for August alone was also mixed: President Barack Obama, his Republican presidential rival Mitt Romney, and the Federal Reserve can all take something from it.

The increase in total employment in the 30 months following recessions was 3.8 percent under George W. Bush starting in 2003, and 3.4 percent under George H.W. Bush and Bill Clinton from 1991 to 1993 - though Clinton’s economy exhibited more robust job growth later in the cycle. On this comparison, it’s hard to argue Obama’s record on job creation is noticeably weak. Republicans willing to reach back 30 years, however, can point to much stronger numbers under Reagan.

As for August, the net new jobs figure of 96,000 was distinctly under par - fodder for the Romney camp. Yet the unemployment rate, measured by a different survey, declined to 8.1 percent. Another 0.2 percentage point drop would take the rate below 8 percent, surely a psychological threshold that Obama’s team would play up.

Beyond the headline numbers, the report underlined the sluggish nature of America’s economic recovery. The manufacturing sector lost 15,000 jobs, while overall new jobs figures for both June and July were revised lower. And the decline in the unemployment rate was mostly the result of reduced participation in the workforce. The ratio of total employment to population in August was only 0.1 percentage point above its December 2009 nadir. On this metric, Obama’s record looks poor. Thirty months after the previous three recessions, that metric had improved much more strongly, by at least one percentage point.

In any event, both presidential candidates will get talking points from the new data. The Fed, which meets next week, also gets a new input for its analysis. The U.S. central bank has indicated that it is leaning toward another round of so-called quantitative easing - essentially, bond purchases that amount to printing money. The lackluster report on Friday won’t discourage Fed Chairman Ben Bernanke from pushing ahead - and sooner rather than later.

Context News

U.S. nonfarm employment increased by 96,000 on a seasonally adjusted basis in August, according to a Sept. 7 report from the Bureau of Labor Statistics. The unemployment rate fell by 0.2 percentage point to 8.1 percent. July and August job creation figures were revised down by a total of 41,000.

In the 30 months since employment bottomed in February 2010, the U.S. economy has added just over 4 million jobs, about 3.1 percent of the February 2010 total of 129.2 million. Employment increased 3.8 percent in the 30 months following the June 2003 bottom under George W. Bush, 3.4 percent following the May 1991 bottom under Bush’s father and then Bill Clinton, and 9.8 percent after the November 1982 low under Ronald Reagan.

Further back, U.S. jobs grew 9.6 percent following the April 1975 employment low, 8.9 percent after the November 1970 bottom, and 6.3 percent following the February 1961 trough.

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