Tag Archives: Clinton

The US Economy in 2015

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Following the first installment of a year-end interview on the global outlook, I turn in the second installment to the domestic economy.

Part 2. The US Economy

Q – As economic adviser to President Clinton, you oversaw one of the most prosperous periods in recent U.S. history. How do you assess the economic strategy of the Obama administration? What would you have done differently were you an adviser?

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The Unemployment Rate and Private Job Growth

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Once again this morning, the BLS employment release tells conflicting stories depending on whether one looks at the unemployment rate or job growth.   The U.S. unemployment rate fell from 8.3% in July to 8.1% in August, continuing the gradual three-year downward trend (from its 2009 peak at 10 %).     Political economy equations often say that the direction of movement of the unemployment rate in the period preceding a presidential election is the main economic determinant of whether the incumbent is re-elected.  

“Are we better off than we were four years ago?”   Yes.   If the criterion is to be a narrow unemployment comparison, and one counts from the month following the day Obama took the oath of office, then we are now at a lower unemployment rate.   But that is very simple-minded as a criterion.   (Look at GDP.  Better yet look at how the free-fall turned around  and the recession ended within his first 5 months.)

Employment growth is the more important statistic, to evaluate the progress of the economic recovery.  Here today’s BLS report was disappointing: only 96,000 jobs created.    The jobs number climbs into six digits if one looks at private sector employment growth.  

By the way, am I the only one who sees a general bias toward negativity in the media?   When the unemployment number looks bad and job creation looks good, like a month ago, the newspapers seem to headline the former.   When the unemployment rate looks good and employment disappoints, as this time around, they tend to focus on the latter.  The TV shows do the same (including those on which I appear).

In any case, as always, one should look at a longer run trend.   The fact is that private sector job growth has been running at an annual rate of 162,000 per month over the last two years.    This is far greater than the rate during the Bush Administration even if one looks only at the years in between the Bush recessions of 2001 and 2008  (83,000 per month, on average, from November 2001 to December 2007.)   It is not enough.  For example it is much less than the rate during the Clinton Administration, month in, month out (218,000 private sector jobs created per month, on average).  But it is a big improvement over where we were.

On the subject of Bill Clinton.  His speech to the Democratic Convention  Wednesday night again demonstrated his unique ability to explain wonkish policy details in a folksy way.    This included pointing out the statistics on private sector job creation under Democratic presidents since 1961 compared to Republican Presidents.   The rate has been just over twice as great.   Thus the current Obama-Bush comparison continues a half-century tradition.

The point about private sector job expansion looking better than overall employment growth is of course what Obama was trying to say in June when he made his unfortunately worded statement that “the private sector is doing fine.”   He quickly retracted that language, which was the right thing to do.  But the point still needs to be made.

Why look at private sector jobs, instead of total jobs?    I have a feeling that this is a Republican way of looking at things.  The Republicans don’t seem to believe there is anything amiss if a million public sector workers lose their jobs.  (Which is what has happened over the last year:  934,000.)    Teachers, firefighters, construction workers…   Apparently those don’t  count as real jobs because they are in the public sector.    That would explain the Republican congressional opposition to Obama’s initial fiscal stimulus in 2009 (the one that ended the recession) and their more successful subsequent attempts to block Obama’s job proposals.  

So maybe we should be looking at total employment after all, rather than private employment.  Or even focusing on the underemployed and discouraged workers.  But these are all reasons why we need to resume enacting the policies that Obama has been trying to enact.

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Perspective on the Latest Employment Numbers

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The BLS this morning reported U.S. job gains of 163,000 in July, which is good news in the eyes of the financial markets.  The jobs data had been disappointing over the preceding three spring months.  Before that, during the winter months, employment growth was strong.

In terms of perceptions and politics, pundits will say that today’s report is good news for Obama’s re-election prospects, just as they said the spring jobs numbers were bad news for the President.  But my interest is in economics and reality, rather than perceptions and politics.   From a longer-term perspective, a few important facts have not been adequately discussed.

  • 1. The rate of job growth over the last two years, 137,000 jobs per month, inadequate as it is, has actually been greater than the rate of job growth during the George W. Bush Administration (101,000 per month) even if one excludes the two Bush recessions that occurred in the first and last years of his administration, respectively.   The Obama Administration looks even better if one confines the numbers to private sector employment, since the government has been shedding jobs under Obama and was growing rapidly under Bush. Of course this is still nothing like the sort of progress we would ideally want to see – say, the 237,000 jobs that were created month in and month out on average during the 8 years of the Clinton Administration. And the number of long-term unemployed remains worryingly high. But the situation is a big improvement over the economy that Obama inherited three years ago.  


  • 2. An unemployment rate of 8.3% shows that the economy is still in unsatisfactory shape.   (The July numbers show a rise from 8.21 to 8.25, which the BLS labelled “essentially unchanged” in the first sentence of its release.)   Unemployment remains higher than what the Obama Administration hoped we would have by now at the time it took office in January 2009.  Most of the difference can be explained by the fact that the level of economic activity in January 2009 – as a result of the free-fall in the last part of 2008 – was much worse than was realized at the time. The subsequent downward revision by the Commerce Department in the official statistic for the level of GDP at the start of 2009 can explain why the level of the economy is disappointing 3 ½ years later, more than the rate of growth over the intervening period. After all, those horrendous 2008 rates of decline in GDP and employment turned around during the six months immediately following the day Obama took office.  


  • 3. Most private-sector and independent economists agree that the Obama fiscal stimulus made a positive difference; that – together with TARP and monetary easing by the Fed, unpopular as they are in some circles — it helps explain the mid-2009 economic turnaround; and that it helps explain the moderate growth that followed (2 ½ % growth p.a. in the 2nd half of 2009 plus 2010).   A good explanation for the disappointingly slow rate of growth in output and employment since the end of 2010 is that the fiscal stimulus has been withdrawn and the government sector has been contracting. (Since the November 2010 election, there have been enough Republicans in Congress to block the American Jobs Act and every other action that Obama proposes.)  One can see this in the composition of both GDP and employment. Today’s jobs report features another 9,000 jobs cut in state, local, and federal governments, continuing the pattern that has held throughout the recovery: jobs and output in manufacturing and the rest of the private sector have been expanding, partially offset by contraction in the public sector.
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