What is the
real story behind jobs creation under President Obama’s leadership? If we are to believe what democrats are
saying, President Obama is responsible for the most successful jobs recovery in
history while republicans are quick to scorn the president’s economic and job
growth policies as being a failure.
So, which is it, success or failure, or do the facts land us someplace between the two?
Let us take an in-depth look at jobs creation under this president and see for ourselves just exactly where we stand on jobs creation under the leadership of President Obama. To carry out this endeavor, we will rely heavily on the assistance of the Bureau of Labor Statistics who has done a fine job in compiling monthly jobs figures.
To get started, let us first set the stage with some basic facts:
So, which is it, success or failure, or do the facts land us someplace between the two?
Let us take an in-depth look at jobs creation under this president and see for ourselves just exactly where we stand on jobs creation under the leadership of President Obama. To carry out this endeavor, we will rely heavily on the assistance of the Bureau of Labor Statistics who has done a fine job in compiling monthly jobs figures.
To get started, let us first set the stage with some basic facts:
·
Between
80,000 and 170,000 new jobs {125,000 average} must be added to the economy each
month in order to keep pace with the nation’s population growth
·
As
the nation entered into the Great Recession, in the 2nd quarter of
2007 monthly jobs creation dropped below what was necessary to keep pace with population
growth
·
The
economy began to shed jobs in the 1st quarter of 2008
·
Barack
Obama was sworn in as President of the United States on January 20, 2009
·
The
nation’s unemployment rate was 7.8% when Barack Obama took office
Okay, with that out of the way, we can begin digging in to the numbers!
The Jobs Situation Before Obama Took Office
Heading in
to the Great Recession job growth began to decline right around the start of
2007. By the 1st quarter of
2008 that job growth reversed and the economy actually began to shed jobs, a
trend that would last for 23 months straight.
It was in September of 2008, when the Lehman Brothers bank collapsed, that the recession took its hardest hit. The economic impact of the collapse included an immediate spike in job losses. Job losses spiked a second time in November, pushing the rate of loss over one half million jobs per month, a figure that is maintained until May of the following year.
The first major step to mitigate job loss and restore economic growth was the creation of the Troubled Asset Relief Program or TARP. TARP was a group of programs created in an effort to stabilize the country’s financial sector in the wake of the financial crisis. The $787 billion {later reduced to $475 billion} TARP fund was created in early October of 2008 when President Bush signed the Emergency Economic Stabilization Act in to law. The distribution of TARP funds began in late October of 2008 and continued through the end of 2009.
TARP was not the only Bush Administration measure aimed to thwart off the negative effects of the recession, but it was certainly the largest and most effective.
It was in September of 2008, when the Lehman Brothers bank collapsed, that the recession took its hardest hit. The economic impact of the collapse included an immediate spike in job losses. Job losses spiked a second time in November, pushing the rate of loss over one half million jobs per month, a figure that is maintained until May of the following year.
The first major step to mitigate job loss and restore economic growth was the creation of the Troubled Asset Relief Program or TARP. TARP was a group of programs created in an effort to stabilize the country’s financial sector in the wake of the financial crisis. The $787 billion {later reduced to $475 billion} TARP fund was created in early October of 2008 when President Bush signed the Emergency Economic Stabilization Act in to law. The distribution of TARP funds began in late October of 2008 and continued through the end of 2009.
TARP was not the only Bush Administration measure aimed to thwart off the negative effects of the recession, but it was certainly the largest and most effective.
Obama Takes Office and Gets to Work
Barack Obama
is sworn in as the President of the United States on January 20, 2009. At the time Obama took office and as a result
of the recession, the US economy had at this point shed 4.4 million jobs and the
unemployment rate had risen from the mid 4% rate, enjoyed by his predecessor
for most of the 2 years leading up to the recession, to 7.8%.
The Obama transition team went straight to work on a stimulus plan that the president-elect had many times spoken of during his campaign for president, a plan intended to create shovel ready jobs and to quickly revitalize the economy through a massive stimulus. By the time Barack Obama officially took office the creation of the stimulus was well on its way however, the stimulus package put before Obama for the first time in his official capacity as the President of the United States differed slightly from his own vision.
Changes were made and a stimulus package that better reflected the new president’s desire was then passed in congress and signed in to law by President Obama just a few days shy of a full month in office.
The Obama transition team went straight to work on a stimulus plan that the president-elect had many times spoken of during his campaign for president, a plan intended to create shovel ready jobs and to quickly revitalize the economy through a massive stimulus. By the time Barack Obama officially took office the creation of the stimulus was well on its way however, the stimulus package put before Obama for the first time in his official capacity as the President of the United States differed slightly from his own vision.
Changes were made and a stimulus package that better reflected the new president’s desire was then passed in congress and signed in to law by President Obama just a few days shy of a full month in office.
A Look at the Stimulus
In December of 2008, the Congressional Budget Office (CBO) published a report which indicated that the recession was deeper than earlier predicted and was expected to lose an additional 4 million jobs. This report prompted president-elect Obama to up the game from his commitment of creating 2.5 million jobs in two years to creating 3 million and tasked his team to get more aggressive with their plan. At the end of the day, President Obama’s 3 member Council of Economic Advisors (CEA) proposed and the president agreed to a plan which the CEA claimed would create or save 3.5 million jobs in the first two years.
Understanding that 3.5 million jobs over a two year period would hardly keep pace with population growth much less put to work the millions who had already lost their jobs, Republicans in congress remained skeptical of the stimulus plan being proposed by democrat’s and were calling for significantly more spending on job creating infrastructure programs. Democrat’s on the other hand were more in favor of shoring up a safety net by expanding unemployment benefits and increasing food stamp benefits. In the end the plan did emphasize shovel ready infrastructure jobs intended to create these jobs quickly but not near as much spending was allocated to short term jobs creation as most economist believe was needed.
The plan had both short and long term goals with some of the spending spread out over decade however, the bulk of the provisions in the package were funded immediately and ended after the 1st and 2nd year.
And on February 17, 2009, the American Recovery and Reinvestment Act, better known as “the stimulus” was signed into law. Again, the primary objective of the stimulus was to immediately create jobs!
The Bleeding Continued
With TARP working to stabilize the financial sector and Obama’s stimulus signed in to law, America’s unemployed labor force stood poised and ready to get to work. Unfortunately, new jobs failed to transpire.
Despite efforts to kick start the economy, 15 of the 19 months following the passage of the stimulus experience job losses 10 of which reported losses in excess of 200,000 jobs. Unemployment continued to rise and in October of 2009 peaked at 10% and then held steady between 9.8% and 9.9% for the following six months. During this 19 month period the economy shed another 4.6 million net jobs and if you were to factor in the number of jobs that the White House economists projected the stimulus would save/create {3.5 million in two years}, the economy could have actually shed as many as 7.4 million jobs during this 19 month period.
Finally, in May of 2010, after experiencing the first consecutive months of jobs growth in 25 months, the unemployment rate dropped to 9.6% and over the following five months, bounced between 9.4% and 9.5%. However, the drop in unemployment was not all good news as the economy shed another 282,000 jobs over the same period. The lowering of the unemployment rate coupled with a continued loss of jobs told a bleak story, thousands of people had given up on looking for work!
A milestone was reached in September of 2010 which marked the final month to record jobs losses during the Great Recession.
It took the Obama Administration over one and a half years to stop the bleeding but it did finally stop. Unfortunately, over that time an additional 4.6 million net jobs were lost on top of the 4.4 million that were lost prior to his taking office.
The Jobs Hole that Needs to be Filled
There are three goals in the jobs recovery process. First of course is to stop the loss of jobs; second, to create enough jobs to keep up with population growth; and last, to fill the hole of jobs lost during the recession.
It will be forever debated as to the reason why, but it was 20 months into President Obama’s first term in office {19 months since the stimulus was passed} before the economy finally stopped shedding jobs. All tolled, 32 months passed from the time jobs first dropped into the negative numbers until the bleeding was permanently stopped. Over those 32 months a net 9 million jobs were lost.
Beyond the jobs that were physically lost is the loss of jobs that were needed to keep pace with population growth meaning that for any given month approximately 125,000 new jobs were needed to accommodate new entrance into the work force.
During the two years of the Great Recession, prior to President Obama taking office, 14 months experienced a net zero job growth and the remaining 10 months record an averaged shortfall of 28,000 jobs per month. This equated to an additional 2 million new jobs deficit. And in the 73 months that President Obama has been in office an additional 9.1 million new jobs were required just to maintain status quo.
In total 11.1 million new jobs were needed to make up for the shortfall in keeping pace with population growth. Add to this the 9 million physical jobs the economy shed during the Great Recession and we arrive at a jobs hole 20.1 million deep that needed filling.
And so begins the task of filling that hole.
Now a Look at Job Creation
·
After Two Years
By
the end of 2009 TARP monies had largely served their purpose in helping to
stabilize the financial sector but unfortunately the stimulus was not as
successful in achieving its intended purpose of creating shovel ready jobs and
getting American back to work. By the
end of 2009 unemployment had risen from the 7.8% it was when President Obama
took office to a near record high of 10%.
In the first 12 months, 4.3 million jobs were shed and total of 4.7
million net jobs were lost through the first 2 years of Obama’s
presidency. Over the same 2 year period a mere 1.5 million
jobs were added to the economy, only half what was needed to keep up with
population growth alone.
·
At the End of Obama’s First Term
While the unemployment rate did drop from its peak of 10%, by the end of President Obama’s 1st term in office the unemployment remained higher than the 7.8% of when he first took office 4 years earlier and now stood at 8.0%. And after 4 years in office, the Obama Administration recorded a net loss of nearly one quarter of a million jobs. All the while, population growth added another 6 million to the number of people in search of employment during President Obama’s first term in office.
While the unemployment rate did drop from its peak of 10%, by the end of President Obama’s 1st term in office the unemployment remained higher than the 7.8% of when he first took office 4 years earlier and now stood at 8.0%. And after 4 years in office, the Obama Administration recorded a net loss of nearly one quarter of a million jobs. All the while, population growth added another 6 million to the number of people in search of employment during President Obama’s first term in office.
·
So Far in Obama’s Second Term
It was at the start of Obama’s second term in office that unemployment finally dropped and held below the rate at which it was when he first entered office but it was another year still before the 9 million physical jobs the economy shed were finally recovered.
But recovering the physical jobs is just one piece of the pie, there are still those 125,000 new jobs needed each month to keep pace with population growth that are absent from this equation.
The hole of 20.1 million jobs dug during the recession and subsequent recovery has been offset by 11.8 million jobs created since President Obama first took office, leaving the US at an 8.3 million jobs deficit now, two years into President Obama’s second term in office.
It was at the start of Obama’s second term in office that unemployment finally dropped and held below the rate at which it was when he first entered office but it was another year still before the 9 million physical jobs the economy shed were finally recovered.
But recovering the physical jobs is just one piece of the pie, there are still those 125,000 new jobs needed each month to keep pace with population growth that are absent from this equation.
The hole of 20.1 million jobs dug during the recession and subsequent recovery has been offset by 11.8 million jobs created since President Obama first took office, leaving the US at an 8.3 million jobs deficit now, two years into President Obama’s second term in office.
Did the Stimulus Work?
The answer to the question “Did the stimulus work?” all depends on who you ask. If you were to pose this question to President Obama or any of his economic staff, of course the answer would be a resounding “yes” however, if you were to ask pretty much anyone else you would get a different answer.
An update report released by the CEA, on the effects of the stimulus, concluded that by the end of 2009 between 1 ½ and 2 million jobs were created as a result of the stimulus. What is uncertain however, is the validity of this claim as in the executive summary of the same report, the authors state that evaluating the impact of the stimulus was “inherently difficult” due to a number of factors. While none of the “number of factors” were identified in the report, one of those factors was the infusion of TARP money into the economy.
The most telling indicator of the ineffectiveness of the stimulus is the unemployment rate. The stimulus, a plan intended to immediately put people back to work, seemed to have had an adverse effect on unemployment, although there are certainly other attributing factors. The two months following the passage of the stimulus were met with sharp upwards unemployment spikes and a year later unemployment remained at a near record high 9.9%. After two years of stimulus, unemployment managed to drop to 9.0% but this was still seven tenths of a percentage point higher than the month the stimulus was passed. It would take a full three years before the unemployment rate returned to that of what it was prior to the stimulus.
It is hard to say for certain what impact the stimulus may have had on job creation, if any at all, but what is for certain is that the economy shed 3.6 million jobs during the 10 month period covered in the CEA’s evaluation and new jobs creation did not seem to gain any steam until three years after its passage. While proponents of the Obama Administration will argue that the stimulus simply took longer to take affect that predicted, a more realistic evaluation of what has taken place is that after four years of near economic stagnation caused by over-regulation and uncertainty, the economy went into a self-correcting mode, an argument that most economist would agree with.
When Will All Jobs Lost Be Recovered?
Now that the slowest recovery in over 50 years is finally showing some life, there is hope that all the jobs lost as a result of the Great Recession and slow economic recovery can be recovered.
Taking in to consideration the 4.4 million jobs shed by the economy prior to President Obama taking office; the 4.6 million jobs shed by the economy after he took office and that 125,000 new jobs are needed each month to keep pace with population growth, if the current growth rate of 261,000 jobs per month is maintained {past 12 month average} without interruption, all lost job will be recovered in May of 2020, 11 years and 4 months from the time President Obama was first sworn in to office.
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