Tuesday, December 26, 2017

The Trump Jobs Miracle

Note - See Updates below.

Everything is a superlative in the mind of Donald Trump. Everything he's done is unbelievably good—far better than anybody expected.That includes the economy.

Perhaps Trump's biggest and most important promise to voters was to create jobs. So how has he managed?

Well, he's been reasonably successful at continuing the long positive trend he inherited from Obama, although so far he lags his predecessor by a little.

For this silly little exercise I compare total net nonfarm jobs created from Trump's first full month in office through the most recent month for which we have data, with the same period in the previous year under Obama. That is, I compare February through November, 2017, with February through November, 2016. Total nonfarm jobs created (seasonally adjusted) is the headline data item (along with the unemployment rate, which is trickier to interpret) that you hear about in the monthly jobs reports issued by the federal government. The source is the authoritative Bureau of Labor Statistics.

The following table shows monthly data for the two years being compared, along with cumulative totals. Data for the most recent two months is preliminary and subject to revision. As you can see, 1.70 million jobs were created under Trump during his first 10 months in office. By contrast, 1.96 million jobs were created during the same period a year earlier under Obama. Oops, Donald, you're slipping a little.


Month

2016 Monthly

2016 Cumulative

2017 Monthly

2017 Cumulative

Feb

237,000

237,000

232,000

232,000

Mar

225,000

462,000

50,000

282,000

Apr

153,000

615,000

207,000

489,000

May

43,000

658,000

145,000

643,000

Jun

297,000

955,000

210,000

844,000

Jul

291,000

1,246,000

138,000

982,000

Aug

176,000

1,422,000

208,000

1,190,000

Sep

249,000

1,671,000

38,000

1,228,000

Oct

124,000

1,795,000

244,000

1,472,000

Nov

164,000

1,959,000

228,000

1,700,000

I say this exercise is "silly" because presidents have less control over the economy than a lot of people think, and also because there hasn't been enough time for any Trump-specific policies to have had an effect. But we need to do the comparison anyway, because Trump exaggerates and claims credit for everything good, and his base is not sophisticated enough to critique his claims.

While we're at it, let's have a gander at the past few years. As before, we're only looking at job creation during the February through November interval, not for the full year. As you can see, Trump continues the trend of strong but slightly declining job creation that he inherited. If we wanted to irritate Donald Trump (and we should), we could say he hasn't yet managed to screw up Obama's economy.


Year

Total Nonfarm Jobs, Feb–Nov (millions)

2017

1.70

2016

1.95

2015

2.25

2014

2.55


We can also view the jobs picture graphically, from the beginning of the Great Recession through the present. The following graph (click on the image for a larger view) comes from the St. Louis Fed, which is the economic research and data arm of the Federal Reserve. (Whenever you see a "FRED" graph, it was generated by the St. Louis Fed, which has an online interactive reporting and graphing service you can access.)


This graph shows total nonfarm jobs (not monthly jobs created) in the economy. Total employment plummeted in the final year of the Bush administration in the recession's raging fury, bottomed out at the end of Obama's first year, and has risen continuously and quite steadily ever since. We've had a remarkable and indeed historic 8-year run of steady job creation which, again, Trump hasn't yet managed to screw up (poke, poke). See any Trump effect? I don't.

While we're at it, we may as well have a look at the unemployment rate.


The rate has declined steadily since its peak near the end of the Great Recession. Again, no visible Trump effect, even if Trump wants to crow about the drop from 4.7 to 4.1 percent during his brief tenure. I suppose any politician would, except Trump's crowing is always cruder, more flagrant and self-serving, and less indulgent of reality than normal political spin. But the rate of decrease in the unemployment rate under Trump is essentially identical to that under Obama over the final 7 years of the Obama administration. Things have been chugging along at this pace for the better part of a decade.

As I said, the unemployment rate requires some interpretation, because it incorporates workforce participation, which is the number of persons who are either employed or actively seeking employment. The unemployment rate can actually fall for perverse reasons, such as unemployed workers getting discouraged and dropping out (declining participation) of the workforce, as often happens in recessions. As an aside, the participation and unemployment rates come from a survey of households, which is different from the employment data, which comes from payroll statistics.

The unemployment rate ostensibly looks quite strong at present, but the workforce participation rate hasn't completely recovered to its level from before the recessiona matter of some curiosity and perhaps even consternation to economists. Low participation could make the unemployment rate appear better than it really is. Thus economists argue about how close to full employment (an economic concept that refers to the maximum employment the economy can sustain without inflation) we actually are. Most think quite close, although the rate could continue falling toward the 3.5 percent range. Another related curiosity is that wages haven't risen as fast as one would expect for such an apparently tight job market, although they are ticking up.

Finally, and deviating a little from the core point of this post, one reason (among many) that economists warn that the recently passed tax overhaul won't stimulate economic growth nearly as much as its proponents believe is that we appear to be scraping the bottle of the labor barrel. A surge in economic growth will require a lot more workers, but it's an open question whether they're out there to be had. An increase in the participation rate could possibly provide additional workers, but will it happen?

Speaking of economic growth (and this really will be my final point), Trump's bragging that his two straight quarters of 3% (3.1% and 3.3%, annualized) growth are practically unprecedented in the post-recession era is false, as most Trump claims are. For example, Q3 of 2013 had 3.1% growth, followed by 4% in Q4. Growth was 4.6% in Q2 of 2014, followed by 5.2% in Q3. Trump's public comments imply, falsely, that he's already achieved 3% annual growth, but that is not the case. It's a worthy goal, though, and probably the upper limit of what is possible on a sustained basis. Until recently, most economists expected—for structural and demographic reasons—a good bit less, and they could still be correct. We will have to wait and see. (By the way, the Republican critique—used to justify their tax cuts—that average annual growth has been below 2% since 2008 is disingenuous, since that period includes a severely depressed economy and the long, slow recovery that always follows depressions.)

The bottom line is that, yes indeed, "Trump's" economy is looking pretty darned good. But that's just the continuation of a very long and steady trend with which Trump had nothing to do, and never even acknowledged during his electoral sniping and criticizing. Now he wants to take credit for what he was given.

Update: Jan 5, 2018 - The December employment report was just released, giving us another month of data. The trend of Trump slightly under-performing Obama continues. 148,000 jobs were added in December, compared to 155,000 in December 2016. This was the 87th continuous month of job creation. November was revised up, from 228,000 to 252,000, while October was revised down, from 244,000 to 211,000. The revisions shave another 9,000 jobs off Trump's total, and Obama beats him by 7,000 in December.

Update: Jan 27, 2018 - Fourth quarter GDP growth came in less than expected at 2.6%, breaking the string of two consecutive quarters of 3% growth. GDP growth for the year was 2.3%, not the 3% Trump has been loosely and falsely implying. All in all not a bad year, and better than last, but it was only the third best year of GDP growth in the past five. There are many reasons to be concerned that going forward the economy is possibly as likely to slow as to grow, not least being the tight job market as explained above. Paul Krugman also notes additional reasons for concern. It's interesting, too, that the world economy has after a decade finally shaken off all the residual drag from the financial crisis and is uniformly growing. Whatever good is happening in the U.S. is not unique, but is part of a broad picture of growth worldwide that we've not seen in a long time. In response to this growth notice, too, that oil prices have been rising smartly. All in all, it looks to me as if the economy presents more perils than opportunity for Trump, but it doesn't hurt that there's significantly more economic activity worldwide.

Copyright (C) 2018 James Michael Brennan, All Rights Reserved

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