Comparing Job Market Recoveries, Trump-Pence Far Surpassing Obama-Biden
Former Vice President Joe Biden is claiming he could “Build Back Better” than President Donald Trump after the economic shutdown to mitigate the spread of the coronavirus (COVID-19) pandemic, citing his record following the Great Recession. However, the U-6 unemployment rate has fallen more in four months post-shutdown under the Trump-Pence administration than it did in four years post-Great Recession under Obama-Biden.
The U.S. Bureau of Labor Statistics (BLS) monthly jobs report found the U.S. economy added 1.4 million jobs in August and the unemployment rate fell more than expected to 8.4%. While the increase in total nonfarm employment hit the consensus forecast, the decline in the employment rate far exceeded expectations.
Forecasts for the unemployment rate ranged from a low of 8.5% to a high of 10.4%. The consensus forecast was a far higher than reported 9.8%.
U-6 is an alternative measure of unemployment defined as the rate for total unemployed, plus all marginally attached workers and total employed part time for economic reasons as a percent of the total civilian labor force, plus all marginally attached workers. In August, the U-6 fell significantly to 14.2% and has fallen 8.6% over the last four months.
The U-6 rate hit an all-time high of 22.8% during shutdown in April. It climbed to the previous high of 17.1% in October 2009, after the Obama-Biden administration took office in January 2009. It remained around that level for an additional nine months after the Great Recession ended in the summer of 2009.
It fell briefly to 14.5% in March 2012 before increasing again over the course of that year. It wasn’t until the following year that the U-6 fell to or below 14.2%. In March 2013, it fell to 13.8% and rose again over the next few months. It finally began to fall consistently later that summer.
What took four years under the Obama-Biden administration, took only four months under the Trump-Pence administration. It is one of several data points suggesting the downturn was an artificial, rather than an organic recession.
Worth noting, the declines in the total civilian unemployment rate and the alternative measure U-6 rate were accompanied by declining labor force participation rates under Obama-Biden. The opposite is true of the declining unemployment rates under Trump-Pence, a period during which labor participation rates have risen.
As a result of BLS methodology, unemployment rate could decline if the labor force shrinks, meaning workers retire or give up on the American dream. Labor force participation was on a downward trend under Obama-Biden, which puts little to no upward pressure on wages.
When labor force participation and the equally important but less-cited employment-population ratio rise, and yet unemployment rates continue to fall even as people enter the labor force, it’s indicative of a far stronger labor market and wages rise.
The result was real wage growth for the first time since the Great Recession. Wages rose by 3% in the fourth quarter (Q4) 2018 for the first time since 2009. Wage growth on the 12-month met or exceeded 3% for consecutive months until that was interrupted for one month in May 2020, a result of the shutdown. Wages, which distorted due to employment fluctuations, have risen by 4.9%, 4.8% and 4.7% in June, July and August, respectively.
