Everyone knows that unemployment is high today and unlikely to fall by much soon.Â Yet, a longer view of the official jobs data would startle most people, including virtually everyone in the media.Â Nearly three years into Barack Obamaâ€™s presidency, his record on private job creation has actually been much stronger than George W. Bushâ€™s at the same point in his first term.Â Whatever the public perception, the real record provides strong evidence for both the relative success of Obamaâ€™s economic program and how hard it now is for American businesses to create large numbers of new jobs â€” as they did once so effortlessly, and without political prodding.
Letâ€™s go to the numbers reported by the Bureau of Labor Statistics (BLS). In the first 33 months of George W. Bushâ€™s presidency, from February 2001 to October 2003, the number of Americans with private jobs fell by 3,054,000 or 2.74 percent. Perhaps Americans were too distracted by Osama bin Laden to pay attention, or everyoneÂ was lulled by the dependably strong job creation of the 1980s and 1990s.Â Whatever the reason back then, Americans are certainly paying attention to jobs now.Â Yet, few seem to have noticed that Barack Obamaâ€™s jobs record has unquestionably been much better.Â In the first 33 months of his presidency, from February 2009 to October 2011, private sector employment fell by 723,000 jobs or 0.66 percent.Â That means that over the first 33 months of the two presidentsâ€™ terms, jobs were lost at more than four times the rate under Bush as under Obama.Â
To be fair, new presidents shouldnâ€™t be held responsible for job losses or job gains in the first five or six months of their administrations.Â Bushâ€™s signature tax cuts, for example, werenâ€™t enacted until June 2001; and while Congress passed Obamaâ€™s signature stimulus program earlier in his term, it didnâ€™t take effect for several more months. But the story is the same when we start counting up jobs without the first five months of each presidentâ€™s term.Â The BLS reports that from July 2001 to October 2003 under Bushâ€™s program, U.S. businesses shed 2,167,000 jobs, or about 2 percent of the workforce. Over the comparable period under Obamaâ€™s policies, from July 2009 to October 2011, American businesses added 1,890,000 jobs, expanding the workforce by 1.75 percent.Â In fact, private employment in Bushâ€™s first term didnâ€™t begin to turn around in a sustained way until March 2004, 38 months into his term.Â By contrast, private employment under Obama started to score gains by April and May of 2010, 14 to 15 months into his term.
The same dynamics have played out with manufacturing workers.Â While they have taken a beating under both presidents, they suffered much harder blows under Bush than Obama. Setting aside, once again, the first five months of each presidentâ€™s term, the data show that under Bush, 2,141,000 Americans employed in producing goods lost their jobs by October 2003, a 9 percent decline. Under Obama, job losses in goods production totaled 183,000 over the comparable period, a 1.0 percent decline.
Public perceptions, especially of Obamaâ€™s record, may be skewed by the collapse of the jobs market in the months before he took office. In the final, dismal year of Bushâ€™s second term, from February 2008 through January 2009, American businesses laid off an astonishing 5,220,000 workers, 4.5 percent of the entire private-sector workforce. Obama and the Fed managed to staunch the hemorrhaging. But the huge job losses in the year before he took office have become a political hurdle which Obama must overcome before he can take credit for putting Americans back to work.
Apart from the obvious disconnect between conventional wisdom and what actually has happened with jobs, the data also speak to certain features of the labor market and the policies we use to affect it. For example, both presidents began their terms with large fiscal stimulus programs, backed up by more stimulus from the Federal Reserve. So, the record now shows clearly that when the economy is depressed, spending stimulus has a more powerful effect on jobs than personal tax cuts.
Beyond that, why couldnâ€™t either president restore the much stronger job creation rates of the 1990s and 1980s? Obamaâ€™s economic team can point to the long-term effects of the 2008 housing collapse and financial crisis, especially the impact of four years of falling home values on middle-class consumption. But another factor also has been at work here, one which contributed mightily to the slow job creation under both presidents, and will similarly affect the next president.
The tectonic change from strong job creation of the 1980s and 1990s to the current times is, in a word, globalization. From 1990 to 2008, the share of worldwide GDP traded across national borders jumped from 18 percent to more than 30 percent, the highest level ever recorded. Intense, new competition from all of that additional trade has made it harder for American businesses to raise their prices, as competition usually does. Thatâ€™s why inflation has remained tame for more than decade, here and nearly everywhere else in the world. The problem that American employers have faced â€” and still do â€” is that certain costs have risen sharply over the same years, especially health care and energy costs. Businesses that cannot pass along higher costs in higher prices have to cut back elsewhere, and they started with jobs and wages.
One irony here is that the Obama health care reform should relieve some of the pressure on jobs, by slowing medical cost increases. The administrationâ€™s energy program, still stalled in Congress, also might slow fuel cost increases, at least over time. So, if he does win reelection in the face of high unemployment, there is a reasonable prospect of stronger job creation in his second term than in his first one â€” or in either of George W. Bushâ€™s terms.