Has the worst recovery ever left 6.5 million jobs on the table?

So argues John Merline at Investors Business Daily, who analyzed the trajectories of post-WWII recoveries to gauge where job growth should have taken the American economy.  Merline prepared this argument in response to claims made by Barack Obama on the campaign trail about creating more than 4 million jobs in the past two years, a convenient starting point for Obama that we’ve noted in the past.  It’s actually just under 4 million in the private sector since May 2010 (3.829 million), which averages out to about 160,000 a month.  That would barely be enough to keep up with contemporaneous population growth, even if one disregards the 742,000 jobs lost in the ten months between the start of the recovery and the Obama jobs reference point, jobs that were lost in the first 14 months after signing the $800 billion stimulus package.

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Obama’s claims are weak tea in the first place, but Merline goes farther in dismantling them by comparing the results to the normal recovery trajectory:

Employment: By this point, the average job growth in the past 10 recoveries was 6.9%. Under Obama, jobs have grown by just 1.9%, according to data from the Minneapolis Federal Reserve.

Had the current recovery kept pace with just the average recovery over the past 60 years, there would be 6.5 million more people with jobs today, and the unemployment rate would be below 7%, instead of above 8%. That assumes several million more Americans would have joined the workforce. If the current anemic labor force were unchanged, those 6.5 million jobs would drive unemployment to 4%.

GDP growth: The Obama recovery has also performed far worse than average when it comes to GDP growth. After 11 quarters, the economy is still only 6.8% bigger than it was when the recession ended. In contrast, GDP was 16% bigger, on average, by this point in the previous 10 recoveries, the Minneapolis Fed data show.

The current recovery is so slow, in fact, that it just barely beats GDP growth 11 quarters after the 1980 recession ended — even though there was the intervening long and painful 1981-82 recession. And unless GDP shoots up in Q2, the current recovery will soon be the absolute worst since the Great Depression.

Had the Obama recovery tracked the average GDP growth in the 10 previous recoveries, the economy would be almost $1.2 trillion bigger today.

Perhaps this has a direct relationship to another pattern noted by IBD in its editorial today:

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To really get a sense of how dismal Obama’s confidence ratings have been, you need to compare them to those during the Reagan recovery (for a visual display, see chart).

The 1981-82 recession lasted almost as long as the last one — 16 months vs. 18 months — and pushed unemployment higher. Yet confidence roared back as Reagan’s economic policies powered a strong and sustained recovery, with the index topping 100 most months.

What reason do people have to feel confident today?

Almost three years into the recovery, unemployment is still above 8%, household incomes are down more than 5%, gasoline prices remain at historic highs, and the economy can only eke out meager gains.

On top of this, we learned this week that housing prices are back at their mid-2002 levels. So, naturally, Obama’s again making excuses and shifting blame.

On that last point, I have to rise in partial defense of the Obama administration.  Housing prices needed to return to rational valuations.  The core of the financial collapse that preceded the recession was the decoupling of rate of increase in home values from normal inflation, and the 2002-3 valuations probably represent a rational price level for today.  In fact, the big problem in this case was the Obama administration’s interventions to prevent the rational revaluations, which comprised a series of temporary and expensive subsidies that did nothing except steal demand from future quarters.  We would have already found the bottom and started to lift up from it by now had Obama and his team not interfered with the market forces that provide those rational valuations.

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Otherwise, though, IBD gives a spot-on analysis, and provide this telling comparison on consumer confidence:

Clearly, this recovery has been badly bungled, and a great deal of pain caused by the outcome of Obama’s blundering.  That makes Mitt Romney as the alternative look a lot more attractive, of course, but Reason’s Nick Gillespie wonders whether Republicans have learned a lesson from the results of Obama’s predecessor:

And of course the Republicans will counter with: See, none of this would have happened if we’d only followed George W. Bush’s disastrous big-government spending ways and expansion of major entitlements and a defense buildup because sharia law is taking over whole hamlets in Oklahoma and our plan to increase annual spending over the next decade by just $1 trillion is so much better than the Prez’s to spend $2 trillion more, especially after increasing federal outlays by 60 percent or more over the previous decade when we controlled things is exactly the tonic the economy needs right now! But seriously folks, what do you expect when you let gay marriage happen? No economy can recover from that!

Exit questions: Do you think the weak recovery primarily stems from the severity of the recession that ended in 2009 or the government’s attempts to ameliorate the recession? Does it worry you more that Obama might be re-elected alongside a GOP Congress (both House and Senate) or that Romney (who supported TARP, auto bailouts, and stimulus) will be elected with a GOP Congress?

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At this point, almost anything in the direction of free market principles would provide significant improvement.  Nick’s got a point, though, on the outcomes we can expect from a return to big-government conservatism.  We need strong discipline and a will to fundamentally change the direction of federal spending, and that won’t come now without a significant amount of pain.  Will the GOP deliver that kind of discipline?  At this point, with the economy in semi-permanent stagnation, it’s time to test them on it.

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Ed Morrissey 12:40 PM | December 16, 2024
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