Reclaiming Common Sense

When Comparing Presidents and Job Creation, What is a Valid Metric?

There was a considerable amount of discussion this past weekend regarding the July Jobs Report. The headline"Seasonally adjusted Non-Farm Payroll" number was less than enthusiastic. The story behind the headline number was that the Private sector data was better than the non-farm payroll (NFP,) and that both data sets were revised upward for May and June. This effectively borrowed growth from July. The seasonally adjusted U-3 unemployment level fell below 4.0%. Workforce participation continues to improve. What is a valid metric? Remember that the NFP and Private Sector data is created using the Current Employment Statistic (CES) data set while th unemployment rate and participation rate are created using the Current Population Survey (CPS) data. T

Do we compare Presidents during random periods of time or the same point in their Presidencies? There was a meme that President Obama was the best jobs President since Clinton during his six year in office. The meme compared former President Obama at 81 months with Clinton at 96 months, George H.W. Bush, who only served one term, and George W.Bush after two recessions. This meme created a need to compare the Presidents at the same time in the tenure and the "Four Presidents at __ months" series was created with the three-part series "Four Presidents at 81 Months." This month there were some who were wanting to compare President Trump's first 18 months with former President Obama's final 18 months. This is most likely because they knew that a look at President Obama's first 18 months would not be pretty. A person could cherry-pick the best 18 months with the worst 18 months.

President Trump has overseen  ballooning full-time jobs, a drop in part-time jobs, and a drop in unemployment. Jobs, non-seasonally adjusted (NSA) CPS jobs peak during July. President Trump has seen the creation of 7.6 million full-time jobs and a net gain of 6.5 million jobs for 3.7 million more workers.

President Obama saw a drop of jobs for an increasing workforce population. There are a couple of things that need to be addressed. 

  • Yes, Former President Obama inherited a recession. Administrations parties tend to swap during looming or present slowdowns.
  • President Trump saw a spike in the population twice, April of 2017 and January 2018. An upward revision to the population decreases workforce population.
  • President Trump's population is growing faster than President Obama's. A faster population growth rate depresses workforce participation.
  • There is a significant difference between recovering jobs and adding jobs. President Obama saw jobs drop and recover, drop and recover.
  • Unemployment spike by 2.1 million under former President Obama and dropped by 1.4 Million under President Trump
  • A drop in part-time jobs is a partial drop in participation because unemployed workers are participants. 

President Bush saw 2.2 million full-time jobs and 2.1 million more unemployed workers added to the economy. President Bush came into office after the "Dot Com" crash and before the attacks of September 11, 2001. Once again the workforce population was up 3.7 million workers. The higher population grow make it difficult for the workforce participation to be maintained.

President Clinton also saw the addition of over 7.4 million jobs. President Clinton experienced a growth in full-time jobs and part-time jobs. President Clinton saw the creation of 6.2 million full-time jobs and the creation of 1.2 million. President Clinton also only saw the addition of 2.9 million more workers. This is comparable to President Obama's population growth and comparable to President Trumps jobs growth. President Clinton started with a smaller workforce population and a smaller job base than his successors. former President Clinton and President trump are the only Presidents to increase jobs and decrease unemployment.

President Reagan added 3.3 Million Jobs for 3.3 million new workers. The see-saw continues. More people added to the workforce population under Republican Presidents than under Democrat Presidents. The Internet meme that called President Obama the best jobs President since Clinton conveniently ignored former President Reagan and conveniently included a President who only served one term.

Participation/Population Matters. If you look at the "Four Presidents at 96 months" article you will see that during the final year in office President Clinton's population was revised significantly higher during the final January of his tenure. You will also note significant downward revisions to the workforce population for former Presidents Bush and Obama. This downward revision boosted the final participation rates of these two former Presidents. President Obama was the only President to see his participation rate drop after 18 months in office.

What is the real unemployment rate? The seasonal factors used to create the unemployment rate change month to month and year to year for the full-time job level, the part-time job level, and the unemployment level. A drop in participation of one 1% is more significant than a drop of 1% in unemployment. President Trump inherited the lowest participation rate of any of the five Presidents. President Obama had the same participation rate as President Reagan after 18 months. Little did we know that former President Obama's participation rate was in a steady downward spiral. The number of missing participants, calculated by comparing the participation rates by the current population and seeing how many participants we could/should have. We have more "missing participants" than unemployed workers. (It isn't because Baby Boomers are retiring.) If we had the same participation as President Obama had then we would have an unemployment rate of nearly 7.5%.

The data matters. The population growth rate matters. The participation rate matters. The number of full-time jobs created matters. More full-time jobs, the better the paycheck. We know that we set a record for July weekly wages. The drop in unemployed workers matters. The number of Job Openings.... we don't know if they are full-time jobs or part-time jobs. We also know that the job opening are highest in the lower or lowest paying work sectors. 

It's the economy.