It came as a shock – the pleasant kind of surprise that sent the stock market soaring to levels not seen in a long time. The January employment report, released last Friday, showed a growth of 240k jobs last month. It was good news for everyone, but especially for President Obama. The story of the first three years of his Presidency has now been written in the job reports:
One year down, two years back up. We’re back to even and working to get ahead.
The data are shown below from the Federal Reserve of St Louis. It’s a chart worth getting to know for not only its curious shape, but how it shapes the election ahead:
When Obama took office (here as 1 Feb 2009) 800k jobs were being lost every month. That loss continued until we hit the bottom in February 2010, with a total loss of 3.6M jobs in the US (2.7% of total jobs). Since then, jobs have been increasing through a few fits and starts to where we are today – down a net 428k for the whole Obama administration. Two more months like we just had and it’ll all be even.
Three more months like we just had and the total job creation in the Obama administration will be equal to the total net gain during the Bush administration (310k).
While this is a stunning turnaround, the work that needs to be done is far from complete. If we back up the same graph just a little bit we can see how big the hole is, starting from the peak in total jobs in Jan 2008:
After a loss of 9M total jobs a net gain of 3.6M may not get us totally back to even, but it shows forward progress. And that may be enough to change the mood of the nation around.
It’s always difficult to credit or blame a President for what happens in an economy, given that we are not a socialist nation (despite some of the rhetoric). Yet that is exactly what happens during a campaign because it is an easy argument to make – and it’s something most Republicans have claimed about Obama since jobs are very much on everyone’s minds. Getting the job count back to even through this administration so far is a huge achievement because it will set the tone for the election season still ahead of us.
We also can’t say exactly why job growth is robust and reasonably steady, since it is clearly ahead of economic growth when compared to a typical postwar Recession. However, we are clearly in a different kind of an event, one that most people now seem to agree is a Depression. Seeing job growth lead economic recovery makes sense when the problem is a lack of demand and dramatic decline in consumer spending. Employers have generally been slow to hire in part because of anxiety about our economic future, so a change in mood is probably fueling this turnaround as much as anything else.
What we do know for a fact is that the first three years of the Obama administration have a story written in the first graph shown. He inherited an economy that was dropping off a cliff, and continued to do so for a year. Since that time, it’s turned around.
One year down, two years back up to even.
Taking the rhetoric of fear and panic out of this election may change it dramatically as we go ahead. There are growing signs that even reasonably conservative voters have come to realize that more fundamental changes are necessary – and that the old slogans and symbols are not doing us any good at all. Faith in “Supply Side” economics has dropped off for the simple reason that it did nothing to prevent the terrible slide shown in the second graph, and may have even helped to cause it.
Certainly, in an economy with highly liquid capital markets open to nearly everyone with some 401(k) money to invest the difference between “earned income” (wages) and investment income has become completely blurred, making arguments for different tax rates questionable at best. Who creates jobs? We all do, as we can see. Job growth is leading economic growth as investment capital sits idle.
Getting back to even on jobs is a huge achievement for the Obama administration. It’s an achievement for us all because it changes the rhetoric of this election cycle. Hopefully the theme of this election will now become gaining back the other 5.4M jobs lost to a lot of economic theories and slogans that never did deliver as promised. That will be the way forward – a truly Progressive vision.
Barataria - The work of Erik Hare 
It was interesting to see so many people share your optimism on the news last Friday since you have had it for a few months. I am still skeptical but it does seem to be real. Your explanation as to how job growth could lead is still lacking but I can see how it might be true.
I like this statement –
“Certainly, in an economy with highly liquid capital markets open to nearly everyone with some 401(k) money to invest the difference between “earned income” (wages) and investment income has become completely blurred, making arguments for different tax rates questionable at best.”
I think you should expand on this a lot more. I see what you mean but this is another topic that needs to be talked about.
Thanks. That is a point I have been thinking about a lot lately, but to expound on it I’d need some more data than I have right now. I was thinking about this as part of a small eBook (or eBook series) on the economy and politics that would put a lot of the Barataria arguments together in one place. There is a bit of a hole here, but I think it’s very true that in a truly liquid market is is impossible to make distinctions between capital and ordinary money.
I am definitely one of those ‘conservatives’ who thinks that fundamental changes are necessary. I can’t vote Republican because they only seem to have the same answers they did 4, 10, 20, or even 40 years ago. I am willing to listen to just about anything at this point but I am not hearing much new. If Obama could get it back to even that is a big point in his favor at least until we get a better idea.
I don’t know why, but you reminded me of this poll showing that a majority of independents think the Republicans are deliberately sabotaging the Obama administration and economy:
http://www.washingtonpost.com/blogs/plum-line/post/independents-and-moderates-agree-gop-deliberately-sabotaging-obamas-jobs-policies/2011/11/07/gIQAPMfSvM_blog.html
I think there is a lot of skepticism out there, and nearly all of it is healthy. People aren’t taking the BS they used to. I just want to see this lead to something good.
Doesn’t this seem suspicious to you? You said yourself that the supposed job growth is way ahead of the economic growth so doesn’t it make as much sense that they are just lying? Statistics can be fudged very easy when you control how they are collected. I am not saying this is the case but it very well could be true.
I can see how it seems suspicious, but keep in mind that this has been trending for a very long time and it is backed up by data from payroll processor ADP. Their numbers vary up and down a bit each month but the aggregate is about the same all in all.
The headline unemployment rate is indeed a lot of fudge and really should not be used (unless you have to relate to someone else’s work, which happens). But this figure, total jobs, is pretty golden and hard to fudge.
I am quite sure it is real and it even makes sense.
I don’t share your enthusiasm for the Democrats but I agree that this does change everything.
I’m excited for the Democrats largely because this could spark the Renaissance of progressive thinking (and a generational change) that I’ve been expecting for over a decade now. I think it’s very important for real “progress” to occur.
One of the leading indicators in the past has been in housing. As you know, Erik, my wife is a Realtor® and she has noticed a significant uptick in business beginning in January. Our Realtor® friends around the country are also noticing the same thing–in spite of much stricter lender requirements for buyers and a glut of sellers upside down in their mortgages. As a result, I was not terribly surprised at the employment figures.
I appreciate this info a lot, thanks.
Jack, that is the kind of thing I want to hear as well. I’m always interested in confirming these numbers because there is always good reason for skepticism. This is real and it’s backed up by a lot of things. Thank you.
Now – let’s all contemplate for a moment that we’re pretty sure that job growth is leading economic growth. To me, this confirms at the very least that things are different this time – and probably confirms that this is more of a Depression (ie, major generational economic change) than an ordinary Recession.
I appreciate the presentation of recent job growth.
One thing I ran across is that the European Central Bank raised interest rates last year. Economist Rebecca Wilder questions whether this was good policy–i.e. that it only contributes to slowing growth in the EU. It’s effects of course radiate back to the world.
http://www.economonitor.com/rebeccawilder/2012/02/02/i-still-dont-get-why-the-ecb-hiked-rates/
One thing we agree on is that Europe has not been nimble enough in handling their financial crisis. Both Bush and Obama and the fed took generally the right corrective actions.
(On foreign policy, in the 1990s, Europe was not nimble enough on Bosnia and Kosovo and then President Clinton had to take the lead. Fortunately Europe has been constructive on Libya and Iran, signaling the US and Europe stand as a united bloc to contain bad things happening in the middle east and encourage the good things.)
I never commented on the ECB raising rates because, frankly, I never understood it. All the signs – slow growth, sovereign debt issues, bank deleveraging – all pointed to cheap money as the best way out. There had to be some internal politics (read: German meddling) that caused that, IMHO.
We have had the right structure in place and the right people to handle this Depression about as well as one could be. The only thing we’ve been missing is the sense of urgency – which would come if we focused more on people than money. But our government has managed the money pretty well all in all, I’d say.
As for foreign policy, it’s funny how Europe got that together so well. I think the outside threats are pretty clear so it’s not too amazing – and most of the nations really don’t want to spend more on military than they have to so coordination fills in gaps nicely. Still, it’s come along very well.
There is a Europe in our future, and I think there is most likely a Euro as well. They just have to get real and see that it’s time to open a joint checking account. 🙂
I think that it is an amazing accomplishment given the fact that the Republicans have done everything possible to see to it that the economy stays in the toilet until next November.
I don’t like assigning motives to people and groups that I don’t know well, so I hate saying that about the Republicans. But it sure looks like that’s what they are doing, and a majority of Americans believe it’s true. That has to bite them in the butt here, especially if things are turning around and they keep whining like they haven’t.
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