Obama’s Jobs Recovery Not So Hot – Reagan’s Capitalistic Approach was Much More Effective


The Bureau of Labor Statistics recently released the national employment situation showing the unemployment rate to be 4.9% as of January 2016, a drop of .1% from December 2015. For the same one-month period, non-farm payroll employment increased by 151,000.

After six years of sluggish recovery from the severe recession of 2007-09, Obama immediately trumpeted the latest BLS release and spoke of the causal success of his policies. On the surface those statistics seem laudable. But how do those statistics square with reality and, in contrast, how do they compare to the recovery after the last severe recession; that of 1980-82?

Ronald Reagan became president in 1981 and faced a bad recession early in his presidency. Barack Obama became president in 2009 during a bad recession which continued through the early part of his presidency (even though many feel that the 2007-09 recession continued to linger for years after it was officially declared over).

Reagan’s approach to countering economic recessions and helping create an environment for job growth was very different from that of Barack Obama. Reagan reinitiated basic capitalist principles by cutting taxes and easing regulations; while Obama advanced progressive doctrines and instigated stealthy taxes (like the twenty new or higher taxes imbedded in the healthcare legislation, aka Obamacare), and continued adding hundreds of thousands of pages in new regulations.

We are now at a time roughly six years after the 2007-09 recession officially ended. Let’s take the job growth data during the past six years and that of the same six-year period following the 1980-82 recession and see how they compare.

Job data from the BLS for six years (actually 73 months to capture the most recent data) after both recessions is assimilated into the graph below. Obama boasts that 13.5 million new jobs were created following the 2007-09 recession. The graph’s dotted line shows those job additions by month under Obama. Reagan’s job growth for the 73 months after the 1980-82 recession showed an increase in absolute numbers of 18.4 million. That was very near 5 million more jobs than Obama in terms of absolute numbers. However, it is important to acknowledge that the Reagan cumulative number occurred during a time when the total work force was much smaller – some 25% smaller than now. That means Reagan’s job growth was much more significant than even the greater 5 million raw number would indicate. Therefore, in order to provide a more accurate and meaningful comparison, the numbers require normalizing for the difference in total available work force during the two periods of time. The dashed line in the graph shows the normalized job additions by month under Reagan. After normalizing for the size of the work force, the Reagan 73 month recovery, then, shows a whopping increase of 23 million equivalent jobs.

In further comparison, the graph (solid line) also shows the number of jobs required to be added to keep pace with new entrants into the job market (basically population growth with some nuances). That exact number is somewhat debatable and is difficult to nail down, estimates range from about 140k per month to nearly 200k per month. The number used to generate the graph below leans toward the conservative side at 150k per month entering the job market. The graph easily depicts that the Obama job recovery barely kept up with the number of new entrants, and was below it for the first three years after the recession. Contrast Obama’s line to that of Reagan’s. Reagan’s job recovery was strong almost immediately. In fact, just a few months after the recession ended, 1.1 million jobs (absolute number) were added for a single month in September 1983. That eclipsed anything Obama could claim during the comparable recovery period even with Obama’s much larger total population and available labor force with which to work.


Subsequent to any economic recession it’s no stretch to expect that job growth should exceed the bare minimum needed to keep pace with new entrants. In fact, we might define ‘real’ growth as anything greater than that minimum. Obama’s six year cumulative growth resulted in a relatively small number of jobs created beyond that needed to satisfy the number of new entrants. In contrast, the Reagan job recovery was a huge 550% stronger than the Obama job recovery in terms of numbers greater than the minimum needed to keep pace with new entrants. We can call that the ‘real’ job growth story: Obama’s growth barely kept pace, while Reagan’s growth blew away the numbers.

As mentioned above, the BLS reported the much heralded 4.9% unemployment rate (known as U-3) in its latest release. That is the ‘official’ rate and the rate repeated by Obama and the media, even though the BLS also tallies another number known as U-6 that many regard as a truer picture of unemployment. The U-6 percentage, which began being kept in 1994, includes ‘marginally attached’ (the set to which discouraged workers belong) and those persons working part time because a full time job is not available. More than double the official unemployment percentage, the U-6 percentage was reported at 9.9% in January 2016. That’s a large number of people still unemployed or underemployed. Also, that percentage was based on ‘seasonal adjustments’, while the unmassaged or raw percentage for January 2016 was 10.5%. See the table below.


Other than the U-6 being at times a politically pesky, yet more accurate, job statistic, there is another statistic that frustrates the singular unemployment number touted by Obama (and politicians generally). That statistic is the labor participation rate. That rate captures the number of persons employed and unemployed (the labor force) relative to the total population (civilian non-institutional, 16 years of age and older). A rising percentage indicates a larger labor force relative to the population; a declining percentage indicates a smaller labor force.

Following an economic recession, a declining unemployment rate with a simultaneously increasing participation rate would indicate a stronger job-growth recovery. So, let’s consider and contrast the two recoveries we’re reviewing.

During Obama’s job recovery, the labor participation rate had a declining trend: about 66% immediately before the 2007-09 recession, to about 62.7% about six years after the recession officially ended. That occurred while the unemployment rate was also dropping. While some suggest that the declining participation rate is attributable to larger numbers of retirees dropping out of the labor market, the actual statistical impact of that age group is minute as it affects the participation rate overall as reported by Forbes. The declining participation rate was more indicative of large numbers of people not entering the labor market and/or leaving the labor market altogether (both likely due to lackluster job prospects overall). The combination of the decreasing labor participation rate and the simultaneously decreasing unemployment rate is not what is identified above as being a strong job-growth recovery. In fact, it could indicate a nullification of any job growth at all; while, at best, it indicates a very lethargic job recovery.

During Reagan’s job recovery the labor participation rate had an upward trend: about 64% right before the 1980-82 recession, to about 66.5% about six years after the recession ended. That upward trending participation rate occurred while the unemployment rate was declining. As indicated above, that is exactly the right combination indicative of a strong job recovery.

Job growth after the recent recession is a testament to the strength and resilience of American businessmen and businesswomen, and to the capitalistic will of the American people in general, not to Obama’s policies as he would have us believe. Those businesspersons managed to overcome the Obama excesses of big government, high taxes and mountains of regulations to add sufficient jobs to keep pace with the growth in population (new entrants into the job market) and eke out small additional growth, according to the government’s monthly data for non-farm payroll employment. What we term real growth during that recovery period, however, was held to extremely mediocre gains because of Obama’s progressive, oppressive policies. In doing the math, Obama’s six-year cumulative job growth greater than what kept pace with new entrants was a puny .27% average annual rate.

Why should Americans settle for the new paradigm of such trivial growth that the policies of Obama and his progressive/Keynesian economists will continue to induce? Reagan proved that the capitalistic combination of lower taxes and modest regulations is the spark needed to generate an environment for robust job growth.

We need that Reagan-capitalist spark now.

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