Tag Archives: private employment

An Update on Progress in the Labor Market Recovery Under Obama

Posted on by

Cumul Private Job Growth from Inauguration to Oct 2015

Cumul Govt Job Growth from Inauguration to Oct 2015

A)  Introduction

The Bureau of Labor Statistics released on November 6 its most recent report on the state of the job market.  It was a strong report, with net job gains of 271,000 in October and the unemployment rate falling to 5.0%.  One should not, however, put too much weight on the figures in just one month’s report.  Indeed, the report for October followed relatively weaker reports in the two previous months.  Rather, one should put all these reports in the longer term context of how the labor market has moved in recent years.  And what they show is continued, and remarkably steady, improvement.

This post will look at that longer term context by updating several labor market charts that have been discussed in previous posts on this blog.  It will look first at net job growth in the private sector and in the government sector in the period since Obama’s inauguration, with a comparison to the similar period during George W. Bush’s term.  The post will then look at the continued fall in the unemployment rate, with a comparison to the similar period under Reagan, and finally to the share of part time workers in total employment.  The last is to see whether there is any evidence to support the assertion coming from Republican critics that Obamacare has led to a shift by employers to part time workers so that they can avoid providing health insurance in the overall wage compensation package for their staff.  We will find that there is no indication in the data that this has been the case.

B)  Total Job Growth

The charts at the top of this post show total net job growth, in the private sector and in the government sector, in the period since Obama’s inauguration (up to October 2015) and under Bush (for his two full terms).  They update similar charts discussed in several earlier posts on this blog, most recently from June 2014.

Private sector job growth has been strong under Obama, and continues to be.  And the record is clearly far better than that under the George W. Bush administration.  There has been a net increase of 9.3 million new private jobs under Obama since the month he was inaugurated, versus just 4.0 million new private jobs over the similar period in the Bush administration.  Furthermore, this 4.0 million additional private jobs was close to the peak achieved in the Bush years, before it started to fall and then plummet as the housing bubble burst and the economy collapsed in the last year of his second term.  By the end of his presidency there were fewer private jobs than there were on the day he was inaugurated, eight years before.

Obama faced this collapse in the jobs market as he took office.  The economy was losing 800,000 private jobs per month, with the economy contracting at the fastest pace since the Great Depression.  The new administration was able to turn this around with the stimulus package and with aggressive Fed actions, with the fall in employment first slowing and then turning around.  The result has been a net growth of 13.5 million new private jobs from the trough just one year into the new administration until now.

Government jobs, in contrast, have been cut.  This hurt total job growth both directly (government jobs are part of total jobs obviously) as well as indirectly.  Indirectly, the government job cuts (as well as the fiscal austerity that began in 2010) reduced demand for goods and hence production at a time when the economy was still depressed and suffering from insufficient demand to keep production lines going.  As discussed in an earlier post on this blog, without the fiscal austerity introduced from 2010 onwards the economy would have recovered from the economic downturn by 2013 and perhaps even 2012.  The initial stimulus package in 2009 turned things around.  It is unfortunate that the government then moved to cuts from 2010 onwards, which reduced the pace of the recovery.

It should be recognized that government jobs as recorded here include government jobs at all levels (federal, state, and local), with federal government jobs only a relatively small share of the total (12.4%).  But government jobs have fallen at all three levels, federal as well as state and local.

The cuts on government jobs during Obama’s time in office stand in sharp contrast to the growth in government jobs during Bush’s two terms.  Yet Obama is charged with being a big government liberal while the Republicans claim to be small government conservatives.

C)  The Rate of Unemployment

Unemployment Rates - Obama vs Reagan, up to Oct 2015After peaking at 10.0% in October 2009, the rate of unemployment has fallen at a remarkably steady pace under Obama (aside from the monthly fluctuations in the reported figures, which will in part be statistical noise as unemployment estimates come from household surveys).  This was discussed in this earlier post on this blog.  The record is certainly better than that under Reagan.  The unemployment rate is now 5.0%, while it was still 6.0% at the same point in the Reagan presidency.

Furthermore, Reagan was not confronted, as Obama was, with an economy in collapse as he took office.  Rather, unemployment began to rise only about a half year after Reagan took office, as he began to implement his new budgetary and other policies.  The unemployment rate then rose to a peak of 10.8% in late 1982 before starting to fall.  And while the recovery was then rapid for a period, supported by rising government spending, it stalled by mid-1984 with unemployment then fluctuating in the range of 7.0% to 7.5% for most of the next two years.  One does not see the steady improvement as one has had under Obama.

With the unemployment rate now at 5.0%, it is expected that the Fed will soon start to raise interest rates.  This would be unfortunate in my view (as well as that of many others, such as Paul Krugman).  Inflation remains low (only 0.2% over the past year for personal consumption expenditures for all goods, or 1.3% over the past year if one excludes the often volatile food and energy costs).  And while wages ticked up by 2.5% over the year before in the most recent BLS labor market report, this is still below the roughly 3 1/2% increases that would be consistent (after expected productivity gains in a normally functioning job market) with the Fed’s 2.0% inflation target.  And if wages are not allowed to rise faster than inflation, then by definition there will be no increase in real wages.

It is of course recognized that the rate of unemployment cannot fall forever.  There will always be some slack in the labor market as workers transition between jobs, and if the unemployment rate is too low, there will be excessive upward pressure on wages, and inflation can become a problem.  But where that “full employment rate of unemployment” is, is not clear.  Different economists have different views.  It does not appear to be at 5.0% under current conditions, as the rate of inflation remains low.  But whether it is at 4.5% or 4.0% is not clear.  At some point, it would be reached.

When it is, the pace of job creation will need to fall to match the pace of labor force growth (from population growth).  Otherwise, by simple arithmetic, the rate of unemployment would continue to fall.  And this cut in employment growth would be the objective of the Fed in raising interest rates:  It would be to slow down the pace of job growth to the rate that matches labor force growth.

Once the Fed does start to raise interest rates, one should then not be surprised, nor criticize, that the pace of job growth has slowed.  That is the aim.  And it will need to slow sharply from what the pace of job growth has been in recent years under Obama.  Over the past two years, for example, employment growth has averaged 236,000 per month. The labor force has grown at a pace of 101,000 per month over this period.  As a result, unemployment has fallen at a pace of 135,000 per month (= 236,000 – 101,000), with this leading the unemployment rate to fall to 5.0% now from 7.2% two years ago.  If unemployment is now to be kept constant rather than falling, the pace of job growth will need to fall by more than half, from 236,000 per month to just 101,000 per month (or slightly more, to be precise, taking into account the arithmetic of a constant unemployment rate).

I have no doubt that when this happens, and the pace of job growth slows, that Obama will be criticized by his Republican critics.  But this will reflect a fundamental confusion of what full employment implies for the labor market.

D)  Part-Time Employment as a Share of Total Employment

Part-Time Employment #2 as Share of Total Employment, Jan 2007 to Oct 2015

Finally, it is of interest to update the graph in an earlier post to see whether there is now any evidence that the Affordable Care Act (Obamacare) has led employers to fire their regular full time workers and replace them with part-timers, in order to avoid the mandate of including health insurance coverage in the wage compensation package they pay to their workers.  Conservative politicians and media asserted this as a fact (see the earlier blog post cited for several references).  But as discussed before, and as confirmed with the more recent data, there is no indication in the data that this has been the case. Indeed, the share of part time workers in the total has been falling at an accelerated pace in the most recent two years, at a time when the Obamacare insurance mandate provisions have come into effect.

The acceleration in the pace of this improvement is consistent with the improvement seen in the overall labor market over the past several years, as discussed above.  As the economy approaches full employment, those who are working part time (not by choice, but because they have no alternative) are able to find full time jobs.  The share of part-time workers in total employment is still somewhat above (at about 4%) what would be normal when the economy is at full employment (at about 3%), lending support to those arguing that while the labor market is improving, we are not yet at full employment (and the Fed should thus wait longer before it starts to raise interest rates).  But it is getting better.

I have also added to the graph a line (in red) showing what the share of part-time employment workers were in total employment during the Reagan years.  At the comparable time in his presidency, the share was higher than what it is now under Obama.  Furthermore, it had improved only slowly under Reagan over the three years leading up to that point.  Yet Reagan is praised by conservatives for his purportedly strong labor market.

E)  Conclusion

The labor market has improved considerably in recent years under Obama.  It could have been better had the government not turned to austerity in 2010, but even with the government cuts, job growth has been reasonably good.  The unemployment rate has now fallen to 5%, and it is expected the Fed will soon begin to raise interest rates in order to slow the pace of job creation.  One should not then be surprised if fewer net new jobs are created each month, nor criticize Obama when it does.  That will be precisely the aim of the policy.  But I strongly suspect that we will nonetheless hear such criticisms.

The Pace of Job Growth by Presidential Term

Posted on by


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.

Employment Growth During the Presidencies of Obama and Bush

Posted on by

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.