Was Obama’s Economy Good?
The Labor Department is set to release the last employment report of the Obama Administration on Tuesday. According to the report, there were 156k new jobs in December, the unemployment rate was 4.7 per cent, and average hourly wages rose three per cent from a year ago. This marks the 75th consecutive month of job growth, a modern-era record.
2.4 million new jobs per year
Almost half of the newly hired workers are immigrants. Last year, these new workers made up 40 percent of the 2.4 million new jobs created in the U.S. As the economy continues to expand, a steady influx of new workers is necessary to maintain the economic expansion. Without immigration, there would be a much slower rate of job growth. Also, the retirement of baby boomers and falling birth rates would mean fewer people to fill open jobs. By hiring immigrants, the economy will always have a steady flow of workers.
As a side note, President Donald Trump routinely takes credit for the economy and the financial markets. Last year, he claimed that his economic policies had created 2.4 million new jobs since he won the election. However, the reality is that the U.S. economy is adding about 171,000 new positions each month, and has been doing so since the 2010 election. With the current rate, it’s nearly impossible to distinguish between Obama and Trump’s record on job creation.
While the number of new jobs in the economy has increased significantly during Obama’s first term, the overall number of private sector jobs has decreased since the start of his tenure. The government sector was responsible for most of the job losses under the Bush administration. The government added 821,000 jobs during the first term of the president, but lost more than two million private-sector jobs.
This increase in employment growth was a major source of optimism for Trump, whose victory has encouraged employers and investors. He claims that the economy will improve as a result. While this is not necessarily true, it is certainly encouraging. Obama’s second term saw manufacturing employment begin to rise, and under Trump’s presidency, this growth has accelerated.
Job growth of 11.6 million
During Obama’s eight years in office, the economy created 11.6 million new jobs. The unemployment rate dropped to a historic low. Average weekly earnings rose 4.2 percent after inflation, and 3.7 percent for production and nonsupervisory jobs. After-tax corporate profits also hit records, and stock prices rose 166 percent. The number of uninsured Americans also declined by 15 million, with premiums growing much slower than before.
The growth in jobs came across the country, with the majority located outside of metropolitan areas. The Obama administration has been largely successful in creating new jobs in the private sector, though the government has lost jobs as well. According to the latest government data, government jobs decreased by 341,000 between February 2009 and February 2011. However, these losses occurred at the state and local level. Furthermore, there are differences in how economists measure job creation. Some use economic models while others rely on raw data. Both methods have their merits and drawbacks.
President Obama’s economic growth was at a record high in the second term of his presidency. Job creation increased 11.6 million during the second term of his administration. By contrast, job growth slowed after the Trump Presidency began. The unemployment rate now stands at 10.2%, which is higher than it was during the Great Recession.
Since President Obama took office, the service sector has been the main source of new jobs. Health care, temporary workers, and the bar, restaurant, and food-service industries have all grown.
Longest recovery on record
Despite Obama’s record of improving the economy, it is clear that there are still many problems. Low-wage countries remain a major threat, unemployment is high, and productivity growth is still below pre-recession levels. The Obama Administration has tried to address these issues, but many of its efforts have been unsuccessful. In particular, the Republican-controlled Congress stalled many of the president’s proposals.
Although unemployment in the United States was as high as 10% in October 2009, the rate is now less than half of that level. The unemployment rate in December rose to 4.7%, which is still the lowest since 2007. The underemployment rate has also dropped: it is now less than nine percent, including part-time workers who want to work full-time. Overall, the Obama economy had a record-breaking year for job growth in 2016. In fact, the economy has created more than 11 million jobs in just four years.
After the passage of the Recovery Act in February 2009, monthly job losses began to slow. Government hiring fell dramatically until the 2010 census, but private employers added 18.0 million jobs in 94 consecutive months, an average of 191,000 per month. Between March 2010 and December 2017, total employment increased by 17.9 million jobs. However, the federal, state, and local governments were net job losers during this period.
The economic recovery under Obama is the longest recovery on record. However, it has hit some headwinds in the past year, but it has continued to move forward, according to Robert Murphy, a professor at Boston College.
Strongest recovery since the Great Depression
The strongest recovery since the Great Depression began in the United States in the mid-1930s, when prices were low, and output was low. The bottom of the depression was in May 1938, and output started growing quickly after that. In fact, it had increased by 58 percent by August 1940. However, prices stayed low for nearly two years, until the start of the war. Figure 8 shows the depression and revival from May 1937 to August 1940. Note the spike in prices in September 1939, but this was not sustained and was not indicative of a price hike.
Many economists have argued that the recovery was driven by two factors. First, the Federal Reserve’s action in implementing the New Deal. The central bank’s actions, including sterilization of gold reserves, were key to the economy’s recovery. This move prevented gold inflows from increasing bank reserves.
Second, the Biden administration’s aggressive fiscal policy helped to drive the recovery. The size of the American Rescue Plan (ARRA) during the recession was larger than in any other rich democracy. The result has been a stronger U.S. economy since the economic crisis hit the country in 2009. Despite the size of the ARRA, policymakers have learned from the mistakes made by the Obama administration in 2009. The ARRA was not large enough for the damage that the financial crisis had caused.
Another factor that helped the United States recover from the Great Depression was World War II. This boosted the economy with increased military spending, and the unemployment rate declined by about seven million between 1940 and 1943. During the Great Depression, unemployment rates reached near twenty-five percent. In contrast, the adjusted rate is four percentage points lower. While both unemployment rates fell during the rest of the recovery period, they grew sharply during the first few years of the war.
Business investment slowest under Trump
The economy has seen a steady decline in business investment over the last three quarters. The trend is pronounced, with the most recent quarter being the slowest since 2009. The largest decrease is in nonresidential structures, such as mining exploration, shafts and wells, and industrial equipment. Consumer spending grew at a slow pace in the fourth quarter, down by 1.8% after increasing at a fast pace in the third quarter.
While the Trump administration has argued that the GOP tax cuts spurred capital stock investment, the numbers point to the opposite. Last year’s increase in gross private domestic investment slowed from 5.1 percent to 1.8 percent. That means the tax cut that the Republicans passed last year is only providing a temporary boost to the economy.
Another worrying trend is that one-fifth of US companies have put their capital-expenditure plans on hold. Of these, about 60 percent have re-evaluated plans. Only six percent of companies have actually cut their capital-expenditure plans. While the negative effects of tariffs may not be obvious immediately, they will continue to have an impact on business investment.