Tag Archives: government employment

The Pace of Job Growth by Presidential Term

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Monthly Job Gains by Presidential Term - Total

Paul Krugman in a post today on his blog notes that the continued claim by Reaganites that job growth during Reagan’s presidential term was especially strong, is a myth.  With a chart such as the one above (which copies his), Krugman notes that monthly net job gains were in fact higher during the presidential terms of Carter and Clinton.  (The data comes from the Bureau of Labor Statistics (BLS).)

This is true.  He also could have gone further.  The record during recent presidential terms differs from the myths pushed by conservatives not only in terms of total job growth, but also in terms of how the net job growth breaks down between private and public sector jobs.  Obama is far from a socialist.

Looking first at private sector jobs:

Monthly Job Gains by Presidential Term - Private

Monthly net private sector job gains are again highest under Clinton and Carter; private jobs in fact fell under Bush II; and growth was quite modest under Bush I.  Reagan comes in after Clinton and Carter.  They have averaged a growth of a bit over 86,000 per month so far under Obama, but more on this below.

Private jobs fell under Bush II even though total jobs rose by a small amount during his term because public sector job growth added to his totals, and were sufficient to make overall job growth under Bush II slightly positive.  Looking at the figures for all of the presidential terms:

Monthly Job Gains by Presidential Term - Public

Public sector jobs include jobs at all government levels (federal, state, and local).  State and local jobs dominate – they currently account for 88% of total public sector jobs.  The story on federal government jobs only can differ, and has been discussed in an earlier post on this blog.  Note also the difference in the scales in the charts for the public sector jobs vs. the charts for private (and overall) jobs.  There are far fewer public sector jobs than private ones in the US economy.

What is striking in this chart is the absolute fall in public sector jobs during Obama’s term.  They increased for everyone else, but have fallen at a rate of about 10,000 per month under Obama.  And has been discussed in earlier posts on this blog, this fall in government jobs during Obama’s term (along with cut-backs in government spending more broadly, which is of course related) can fully account for the slow pace of the recovery from the 2008 economic collapse.

Paul Krugman also notes that one could well argue that it may not be fair to count job growth (or fall) in the first year of a presidential term, as the president inherited the economic situation from his predecessor.  It takes some time for new presidential policies to have an impact.  Defenders of Reagan like to point this out.  But as Krugman notes, one should then do the same for the others as well.  The figures for private job growth are then:

Monthly Job Gains from 12 Months In by Presidential Term - Private

Obama now turns out to have presided over the second highest pace of private job growth (after Clinton), and indeed comes out ahead (even if modestly) of the pace during Reagan.  Reagan is lauded as the “job creator” and Obama as the “job destroyer”.  The facts do not support this, at least if one is focused on private sector (rather than public sector) jobs.

In terms of public sector jobs:

Monthly Job Gains from 12 Months In by Presidential Term - Public

What is striking here is how consistent the pace of public sector job growth now is under Carter, Reagan, Bush I, and Clinton – two Republicans and two Democrats.  The differences are tiny.  The pace of growth is slower under Bush II, but still substantially positive.  But public sector jobs have fallen sharply under Obama, and only under Obama.

If Obama is a “job destroyer”, it is as a destroyer of public sector jobs.  One would not expect that from a “socialist”.  And private jobs (counting from 12 months after inauguration) have grown faster under this “socialist” than under the hero of the right wing – Ronald Reagan.

The Long-Term Downward Trend in Federal Government Employment Has Continued Under Obama

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Fed Govt Employment as % of US Population, Jan 1953 - June 2014

 

A.  The Long-Term Downward Trend in Federal Government Employment

Previous posts on this blog have reported on the fall in total government employment (federal, state, and local) during Obama’s presidential term, in stark contrast to the increases seen during the term of George W. Bush as well as during the terms of other recent presidents.  The same pattern, of government jobs falling under Obama and rising under other presidents, is seen when one takes as the starting point the beginning of an economic downturn rather than the date of inauguration.  Government jobs have been cut compared to what they were at the start of the most recent downturn, in contrast to the increases approved in previous downturns.  These cuts in government jobs during Obama’s tenure, as well as the cuts in government spending, are of course exactly the opposite of what one should do during an economic downturn.  An earlier post estimated that if government spending been allowed to grow at the pace it had under Reagan, the economy would likely have reached full employment output already in 2011.

In terms of overall fiscal impact on the economy, a focus on total government employment and spending makes sense.  The total impact depends on what is being done at all levels of government – federal, state, and local.  But a president has only limited influence on what is happening at the state and local government levels.  It is federal government employment and spending that a president, together with the congress, determine.  Hence in terms of assessing the direction of policy during different presidential terms, limiting the analysis to the federal level makes sense.  The question to be addressed is whether, as many conservatives charge, the number of federal employees has grown sharply under Obama.

The chart at the top of this post shows federal government employment as a share of the US population going back to January 1953, the month Eisenhower was inaugurated.  The government employment figures come from the Bureau of Labor Statistics.  Note that federal government employment excludes active duty military personnel (but includes civilian employees of the Department of Defense).  The population numbers come from the Census Bureau (most conveniently accessed via FRED).

The chart shows that federal government employment as a share of the US population is now well below what it has been historically, and that it has fallen further during the presidential term of Obama.  Federal government employment is now only 0.85% of the US population, or over a third less than the 1.3% share it averaged from the second half of the 1950s through to the end of the 1980s (more than a third of a century).  There were sharp cuts at the start of the Eisenhower administration as the Korean War came to an end, and significant increases in the mid-1960s due to the Vietnam War and Great Society programs, but the averages, over any of the decades, were each still within round-off of 1.3%.  [Note:  While the government employment figures exclude active duty military, there are still major increases in government civilian employment during times of war in the Department of Defense and elsewhere.]

But since the mid-1960s (with the major exception of most of the Reagan term), federal government employment has been on a downward trend, most sharply during the presidential terms of Clinton and now Obama.  The recent fall during Obama’s term might be less of a concern if it was a reversal from a recent sharp increase, or as a reversal of an upward trend.  But government employment is already a third below (as a share of population) where it was through the 1980s, and is being cut further.  A fall by a third is huge.

B.  Federal Government Employment in Specific Presidential Terms

While government employment as a share of population is most appropriate when examining long term trends, some might want also to see the figures in terms of absolute numbers of employees over the course of presidential terms.  Here are the recent ones:

Number of Federal Government Jobs
       (numbers in thousands) Start  End
Reagan:  Jan 1981 to Jan 1989 2,961 3,158  197
Bush I:  Jan 1989 to Jan 1993 3,158 3,092 -66
Clinton:  Jan 1993 to Jan 2001 3,092 2,753 -339
Bush II:  Jan 2001 to Jan 2009 2,753 2,786  33
Obama:  Jan 2009 to June 2014 2,786 2,713 -73

As has been noted before, federal government employment rose sharply during Reagan’s presidential term.  It then fell during the term of Bush I, although not by enough to offset the increase under Reagan (when Bush was the Vice President).  There was then a sharp fall under Clinton, which was reversed to an increase under Bush II.  But federal government employment is now falling again under Obama.

Reagan and Bush II have been celebrated by Republicans as small government conservatives.  But federal government employment rose during their terms.  Clinton and Obama have been denounced by conservatives as big government liberals.  But federal employment fell sharply during their presidencies.  And federal employment also fell during the term of Bush I, the most moderate of recent Republican presidents.  The facts are simply not consistent with the stories told of these presidents.

C.  An Example of The Adverse Impact on Government Capacity

Federal government employment is thus now at a historic low (as a share of population) over a period of at least six decades.  It should not then be a surprise that government programs may be inadequately administered.  One often simply needs more personnel to do it.  A clear recent example of this is the crisis in the Veterans Administration.  The number of veterans has increased sharply in recent years due to the legacy of the Iraq and Afghanistan wars, and veterans from the Vietnam War are now of the age when they most need health care.  A significant number of aged World War II and Korean War veterans also remain and need care.  But the number of doctors, nurses, and other staff at the VA hospitals have been held back from the number needed to provide good care.  And it cannot be said that the existing staff are lazy.  The doctors are fully booked.

Rather than face up to this, lower level staff have for many years now been falsifying records to make it appear that veterans can see a doctor within a reasonable time, when that is not the case.  This of course has made the problem worse, as no one then faced up to the problem and did something about it.  Senior officials in the VA have stated that they were unaware of what was going on.  Having worked in a large bureaucracy myself for most of my career (the World Bank), I can readily believe this to be true.  Senior officials are often unaware of what is common knowledge among front-line staff.  But covering it up by falsifying records only served to make the problem worse.

A bipartisan deal appears to be close to congressional approval to provide additional funding to the Veterans Administration, to go at least some way to resolving the problem.  An additional $5 billion in funds will be provided to hire more doctors, nurses, and other staff needed to provide the care veterans have a right to, while $10 billion will be provided to allow veterans to go to more expensive private health care providers in those cases where they cannot receive a VA doctor’s appointment within 30 days, or when they live more than 40 miles from a VA hospital or clinic.  Whether this funding will suffice is not clear, and has been questioned.  Earlier estimates on the funding needed were far higher.  But Republicans in Congress have refused to approve more, and as of this writing, a final vote on the proposed measure still awaits.  However, any extra funding will at least help.

The veterans issue illustrates well the fundamental problem.  While it is certainly true in any large organization, private or public, that employees exist who are not providing effective service, there are in practice limits to how much one can cut before service suffers.

Employment Growth During the Presidencies of Obama and Bush

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Cumul Private Job Growth from Inauguration to May 2014

Cumul Govt Job Growth from Inauguration to May 2014

The Bureau of Labor Statistics released its regular monthly jobs report on June 6.  Nonfarm payroll employment rose by 217,000 – a broadly similar pace as in recent months.   But most news reports focussed on noting that total jobs in the US (actually, total nonfarm payroll jobs) have now for the first time exceeded the peak previously reached in January 2008, before the sharp fall that began in the last year of the Bush presidency.  It took the economy six years and four months to get back to the level of employment it had then.

While this is a significant benchmark, it is not all that meaningful by itself.  The labor force has continued to grow over the last six years, so unemployment remains high (at a rate of 6.3% currently).  Conservative critics have charged that the pace of job creation under Obama has been slow, and assert that the slow pace is due to Obama’s anti-business administration (they allege), with high taxes and increased regulation, the negative effects (they assert) of the measures under the Affordable Care Act to make it possible for the uninsured to obtain health insurance coverage, plus an allegation of “increased uncertainty”, as all acting to hold back the private sector from creating new jobs.

To judge such allegations, one might examine the pace of job creation during Obama’s term to the pace during the term of George W. Bush, a conservative Republican who was purportedly pro-business and anti-regulation, and who presided over record tax cuts.  One needs also to separate net job growth in the private sector from net job growth in the public sector to understand the story.

The two charts above do this, and update similar charts in previous posts on the blog that have examined the issue (the most recent from January 2013).  Points to note include:

1)  Net private job growth has been far higher under Obama than under Bush.  As the top chart shows, there were 5.2 million additional private sector jobs in May 2014 compared to when Obama was inaugurated, and an additional 9.4 million private jobs from the trough reached in February 2010, a little over a year after Obama took office.  Private jobs were disappearing at a rate of over 800,000 every month when Obama was taking the oath of office.  This was soon turned around as a result of stimulus measures and the aggressive actions of the Fed, with the rate of decline at first diminishing and then positive job growth appearing a year later.

Under Bush, in contrast, there were only 2.4 million more private jobs at the same point in his presidency relative to when he took office.  A primary reason for this difference is that while the economy was collapsing when Obama took office (which he then turned around within a year), the downturn at the start of the Bush term in 2001 began after he took office.  The economy then began to turn around (in terms of job growth) only two and a half years into Bush’s term in office.  Only then did private jobs begin to grow under Bush.

2)  Once the private job growth began (13 months into Obama’s term, and 30 months into Bush’s term), the pace of that job growth has been remarkably steady in both administrations.  There were month to month variations, of course, particularly in the data as originally announced (but then later revised, in the regular process to incorporate more complete data as it becomes available).  That is, the lines in the chart above for private job growth are both remarkably straight once the turning points were reached.

3)  Not only was the pace of private job growth remarkably steady after the turning points, they are also remarkably similar in terms of that pace for Obama and Bush.  That is, the two lines in the graph above are roughly parallel to each other after the respective troughs.  The pace of private job growth has been 184.5 thousand per month under Obama up to now, and a bit less, at 168.2 thousand per month, under Bush from his trough up to the same point in his presidency.

Thus there is no support in this data for the assertion that private sector job growth has been especially slow under Obama, due to an alleged anti-business administration.  Private sector job growth under Obama has been similar to, and in fact a somewhat higher than, the pace under Bush during the respective recoveries.  And total private job growth is far higher under Obama than it was at the same point in the Bush presidency, as the recovery was earlier under Obama.

4)  Where Obama and Bush do differ, and markedly so, has been in net government job growth.  Government jobs grew strongly under Bush (as they have for all recent presidents other than Obama; see this blog post).  But net government jobs have fallen sharply and consistently under Obama.  Only in the last year or so have they leveled off, but with no recovery in number.  Keep in mind that government jobs include jobs at all levels of government, including state and local government.  It is not just the federal administration that is covered here.  But the impact on the economy is similar whether it is a locally employed school teacher being laid off, or a researcher employed by the National Institutes of Health.

Bush is viewed as the small government conservative.  But government jobs grew by 1.1 million from the month of his inauguration to May 2006.  Government jobs fell by 710,000 over the similar period in Obama’s term.

5)  Thus part of the reason net overall job growth has been disappointing during Obama’s term is not that private job growth has been slow, but rather that government has cut back on those it employs, hence bringing down the overall total.  If government jobs had simply remained flat during Obama’s term in office, rather than fall by 710,000, the direct impact on the unemployment rate would have been to bring that rate down to 5.8% from the current 6.3%.  But that would be the direct impact only.  There would also be indirect impacts.  The now employed school teacher or researcher would spend their newly earned income on what they need, which would lead to increased demand for products and employment of additional workers to make them.  (See this Econ 101 blog post on the multiplier and what it means.)  Assuming a not unreasonable employment multiplier of 2 under current conditions, the impact of simply keeping government employment steady rather than allowing it to fall by 710,000 would have been to bring the unemployment rate down to 5.4%.

Had government employment been allowed to grow under Obama as it had under Bush, the impacts would have been significantly larger.  The direct impact alone (before the multiplier) would have brought the unemployment rate down to 5.1%.  Mechanically applying a multiplier still of 2 would imply an unemployment rate brought down to 4.0%.  But this would have then been at the low end of the range normally taken to represent full employment (of perhaps 4% to 5 1/2%, depending on the assessments of different analysts), and it would no longer be correct to assume a multiplier would have remained at 2.  Rather, and as discussed in the blog post cited above on multipliers, there would have been other reactions, including most likely by the Federal Reserve Board.  With the unemployment rate having been brought down to the full employment range, one would expect that the Fed would have shifted back to a more normal interest rate and monetary policy from its current policy (due to the still high unemployment) of targeting interest rates to as close to zero as possible.

Summary and Conclusion

To conclude,  far more private jobs have been created during the Obama presidential term  than during the same period in the term of George W. Bush.  In part this was due to the more rapid recovery under Obama (due to the stimulus and other measures taken) from the economic collapse he inherited from the last year of the Bush administration, than the recovery under Bush from the downturn that began a few months after he became president in 2001.  But it is interesting to see that once the respective recoveries began, the pace of private job growth was similar during the Obama recovery as under the Bush recovery (and indeed somewhat faster under Obama).  And this is despite the contractionary policies followed by government since 2010.  For the first time since at least the 1970s (I did not look back further in that blog post), government spending has been cut in an economic downturn, rather than allowed to rise to make up for insufficient aggregate demand.

Where the Obama and Bush periods differ, and substantially, is in government employment.  Government employment grew under Bush (as is normal, and as has been the case under every prior president since at least Eisenhower), but has been cut sharply under Obama.  It is because of these cuts that total employment growth under Obama has been disappointing.  Without those cuts, the economy would have returned to full employment some time ago.