President Obama's Overrated Unemployment Story
Obama's economic highlight, employment, results not from growth, but a profound shrinking. This administration cites no economic statistic as it does employment. However employment's most popular measuring sticks - the number of employed and the unemployment rate - show Obama's story to be far less than billed. Rather than the crown jewel of his economy, employment further underscores its weakness.
In this year's State of the Union speech Obama stated: "Let me start with the economy, and a basic fact: The United States of America, right now, has the strongest, most durable economy in the world. We're in the middle of the longest streak of private sector job creation in history. More than 14 million new jobs, the strongest two years of job growth since the '90s, an unemployment rate cut in half."
Obama parsed his words carefully here, as he had to, in order to make his case. Saying America "right now, has the strongest, most durable economy in the world" is less than it sounds - considering today's global economic slowdown. But his real focus was accentuating his employment story.
However Obama did not mention that his focal economic achievement - higher employment and a low unemployment rate - must be viewed in isolation to appear impressive. Absent that, Obama's employment story unravels - and with it, his economic record.
The key to understanding this is a rather obscure statistic: The US labor force participation rate.
From the mid-1960s, Americans' participation in the labor force increased from just below 59% to plateauing just above 67% from the late 1990s through the early 2000s. Over the next decade, it dipped, hovering around 66%.
In 2008's last two months, it fell below 66%, reaching 65.7% when Obama took in 2009. It has since declined sharply, hitting 62.4% last September. Even having rebounded to 62.9% in February, dismissing the last seven years, this is its lowest point since 1978.
The large effect resulting from participation's drop is seen by comparing employment from the beginning of Obama's administration to today.
When Obama took office, America's potential labor force (the Bureau of Labor Statistics' Civilian Noninstitutionalized population) measured 234.7 million. February 2016's employment report recorded it at 252.6 million - a 7.6% increase. Employment over this period rose from 142.1 million to 151.1 million. Although a net 9 million employment increase, its 6.3% increase is less than the growth in the potential labor force.
The effect on the unemployment rate is far greater. If America still had the 65.5% labor force participation rate that existed when Obama took office, today's official 4.9% rate would instead be an enormous 8.7%. Conversely, if today's low 62.9% participation rate had prevailed when Obama took office, January 2009's 7.6% unemployment rate would have been just half that - an incredibly low 3.8%.
Two significant facts emerge from putting Obama's seven years into context. First, although an additional nine million employed sounds impressive, it has not kept pace with the growth of America's potential labor force. Second and more dramatically, today's seemingly low unemployment rate is the product of today's low labor force participation rate - without its huge fall, today's unemployment rate would actually be far larger than when Obama took office!
Over an extended period, with a healthy economy and a growing population, employment growth essentially should be a given. The economy grows, the population grows, and employment grows. That is simply normal under most circumstances.
Yet over the last seven years, employment has not kept pace with the potential labor force's growth, but lagged well behind. That is abnormal.
This difference between the growth in the potential labor force and those actually employed is the far lower participation rate. This is a particular abnormality.
Examining Obama's employment and unemployment record, two basic conclusions emerge: Either employment failed to match the potential labor force's growth because there have been insufficient jobs; or Americans deem the available jobs not worth entering the workforce for. Either conclusion indicts Obama's real employment record.
Absent employment, Obama has nothing else to claim as an economic accomplishment. There is a reason why Obama makes no remarks concerning economic growth: there is little on which to comment. Annual real GDP growth during Obama's presidency has averaged less than half of the post-WWII period preceding it - 1.4% from 2009-2015 versus 3.1% from 1946-2008.
So employment is all Obama's economy has. And to have it at all, means looking at it in isolation. Examined in context and comparison, Obama's employment and economic record collapses.