It looks like the Republicans aren’t the only ones with a flare for the dramatic. This week’s Democratic National Convention has included a great deal of rhetoric about all those jobs President Obama has created. But it helps to put things in perspective here before we start exaggerating what has and has not happened.
First of all, President Obama inherited a total disaster. We all know that. And his Presidency involved almost a full year of continued job losses before the economy started to turn around and gains actually started. But we can’t cherry pick start dates, and frankly, there’s been some historical advantage to inheriting a disaster (snapbacks tend to be strong) so let’s just take 2009 as it was.
As you can see below, President Obama has cut government employment substantially. The following chart shows government employment gains vs private employment gains. As I’ve discussed previously, the decline in government employment is largely due to state & local job losses. As currency users with balanced budget amendments the states are largely dependent on the Federal government to sustain employment levels if tax revenues collapse. There is simply no other way they can balance budgets when revenues collapse if they don’t lay off workers. So some will say this doesn’t fall at the Presiden’t feet. I say wrong. A misunderstanding of the currency user vs issuer dynamic is most certainly an important factor here. And while the Recovery Act bolstered state budgets it clearly left a great deal to be desired. So what we’ve seen is a democrat who has essentially gutted government workers. Not exactly the record you might expect and certainly not something the Democratic party would be expected to applaud as some try to frame this as a positive when compared to past Republican administrations (as if this government austerity is a good thing just because it goes against the Democratic “big government” label).
To President Obama’s credit, private employment has been relatively strong. Since the bottom we’ve seen over 4MM jobs. But since 2009 we’re essentially flat. So it sounds great when you cherry pick the bottom, but the overall picture looks less impressive when you consider the President’s full term. Not to mention, a deeper contraction has historically resulted in a stronger snapback. As the AP recently noted, this job’s recovery is unusually weak when compared to past recoveries:
“The economy shed a staggering 8.8 million jobs during and shortly after the recession. Since employment hit bottom, the economy has created just over 4 million jobs. So the new hiring has replaced 46 percent of the lost jobs, by far the worst performance since World War II. In the previous eight recoveries, the economy had regained more than 350 percent of the jobs lost, on average.
During the 1981-82 recession, the U.S. lost 2.8 million jobs. In the three years and one month after that recession ended, the economy added 9.8 million – replacing the 2.8 million and adding 7 million more.”
The chart below shows the overall picture. As you can see, we’re about back to break-even and historically, this is a very weak recovery. So again, without cherry picking, President Obama’s record is extremely mixed here. He’s gutted government employment and his private employment record leaves much to be desired, especially when we consider how historically weak this job’s recovery has been. The DNC is right to point out that President Obama inherited a mess, but his recipe for recovery hasn’t exactly been great either.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.