President Obama’s Poor Job Growth

Barack Obama’s presidency has ended and many have praised his ability to turn around the economy from its Great Recession. According to Wikipedia Obama’s so-called “recovery” supposedly “created” 11.4 million jobs in total. However, many conservatives and libertarians point out that the labor force participation rate has reached an all-time low. While this is true, as an economist, and libertarian, I advocate further research on why such participation rates have decreased, rather than including everyone exiting the workforce as part of the “economic problem” itself.

I’ve already addressed that Obama had a job growth of 1.7 million Jobs in August. However, I’ve further updated my methodology and way of recording such increases and decreases of job growths under a president, and this would truly reflect real job growth under a president. The changes of methodology that I’ve employed are:

1. Mistakes in calculating differences of the non-participants have been addressed.
2. Changes from looking at workforce net, and unemployed net towards changes in total employment population, towards changes in workforce total as an additional factor. The reason for this is that if unemployment drops, this of course indicates that job growth has increased, while an increase in workforce will also add towards that increase.
3. Changes in who is a non-participant. If we include all reasons why the participation rate is dropping, the growth rate would be negative, which does not reflect a true reality of actual job growth under presidency.

Now that it’s January, we can finalize the actual job growth of Obama. However, as a note, we do not include January this year as under Obama, as we’ve included January 2009 as part of Obama’s job growth. January 2017 will be applied to President Trump’s record. A difference of 19 days will most likely not yield a huge difference of job growth. This also helps us simplify the calculations of job growth from January 1^st to December 31^st as Bureau of Labor statistics do not give individual days of job growth within those months as it is not feasible, thus to do a calculation based on year start of January 20^th towards January the 19^th is not possible.

If we look at how to calculate the non-participant rate, we find that the two reasons which we can exclude people from what we call the true non-participant rate is people which have declared ill/disabled, and retired. Other items, such as home responsibilities, going to school, and other reasons will be included in our calculations to show changes in the true non-participant rates, rather than using the full participant rates.

This BLS article shows those reasons in 2004, and in 2014. However, changes were not recorded, and it only recorded reasons specified within those two particular years, therefore I have created a change in percentages per year when calculating the difference of reasons from 2004 to 2014. Below are the reasons on why I’ve included home responsibilities, going to school, and other reasons into my calculations.

• Home responsibilities: Essentially the questionnaire given out towards the non-participants were extremely vague on why those participants have chosen home responsibility as the reason for not participating in the workforce. A negative 0.37 percent change per year was observed between 2004 to 2014, and thus we can conclude that more people are either moving towards other categories, of which the other two potential discouraging reasons may be education, or other reasons. Home responsibilities may be counted as a discouragement of entering the workforce because as less job opportunities have arisen, more would opt into staying at home with family members, or in their own homes. However, data shows that this reason is declining, indicating that those reasons in 2004 compared to 2014 have changed, and this indicates that more are entering the workforce, have become discouraged in other ways, have retired, or became ill.

• Going to School/Education: Again, the question in this section is extremely vague nor does it provide in-depth reasons why non-participants are attending schooling/higher level education. However, if job growth includes part time jobs, high school and/or college students may have the ability to obtain a part time job as well, but as this article states, it is actually harder for students to obtain a part time job, indicating either a lack of job opportunities, or extremely high entrance requirements being taken up by the retired (which indicates job growth).

• Other Reasons: Other reasons include those who are discouraged from participating. However, the methodology is extremely vague and not updated from a yearly basis, thus estimates must be made.

After taking into consideration why people are not participating in the labor force, we can look at the changes of reason over time in this table.

From these variables, we can derive the formula:

True non-participation rate= Recorded Non-Participation rate population less Ill/Disabled Population Less Retired Population.

With this, a table of the True Non-Participation rate on 1^st of January and 31^st of December of each year is provided from 2009 to 2016. January will have the effective percentage breakdown of the previous year (2009 January will have 2008 reasons, so for example, 18.01% of non-participants would have reported as ill/disabled) while December will have an in-year percentage breakdown of reasons.

After calculating the TNPR, we now have an actual reflection of those who have dropped out of the labor force due to discouragement of job opportunities. Thus, we have a more accurate way of calculating job growth by observing it from a year by year perspective rather than observing it from the beginning of a presidency to it end.

The year by year metric also disputes the claim of job growth of 11.4 million, as the job growth total is now revised to 7.526 million (Changes in Employment plus Changes in Workforce). However, we also measured those who had truly dropped out of the labor force for potential reasons of discouragement, and thus the net result is 3.055 million jobs (73.20% less than claimed).

Some might assert that 3.055 million jobs had actually come into existence, which is better than nothing. However, if we measure what categories of jobs had grown, this table shows this below:

The majority of jobs had resulted in servicing sectors such as food services, healthcare services, and retail jobs. A majority of these jobs barely contribute towards actual capital accumulation, which leads towards a scenario of capital consumption. Essentially, 54.40% of jobs have extremely small contributions towards capital accumulation. No clear indicators on what administration or professional services had been formed, thus we cannot accept it as jobs generating capital accumulation.

Furthermore, a majority of jobs have originated in the healthcare sector, most of which occurred in 2014 (1.995 million), indicating that when major provisions of the ACA took place, demand for medical healthcare products/services rose. However, because an increase of healthcare costs is recorded, this increase of medical sector individuals could not cover the actual increase of demand, as the United States currently suffers from an artificially created restriction of supply, and an artificially subsidized amount of demand.

In conclusion:

• Obama’s job growth numbers are 73% less than claimed.

• A vast majority of these jobs (54%) do not contribute towards capital accumulation, but rather towards capital consumption.

• A majority of these non-beneficial jobs have grown in the healthcare sector, indicating that government induced stimuluses, which had other negative consequences, further increased healthcare spending as a whole.

Obama’s job growth record is statistically disappointing, and created deleterious effects on America’s recovering economy.

Photo: White House

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Baland Rabayah

Baland Rabayah is a student of accounting and finance at Bangor University and is also pursuing a Graduate Diploma in Economics at the University of London. Baland holds a Diploma in Accounting and Finance from the Bahrain Institute of Banking and Finance. He plans to pursue to continue his studies by doing a master's in economic history and a PhD in Economics. Baland follows a mixture of Chicagoan and Austrian principles in economics, with his influences being Murray Rothbard, Ludwig von Mises, Friedrich Hayek, George Selgin, Lawrence H. White, Peter G. Klein, Ronald Coase, and Milton Friedman. He is currently part of the Being Libertarian Merchandise Project’s management, and runs his own investments. Baland is also the former CEO of MoreTech Bahrain, a start-up company which attempted to launch Bahrain's and the Middle East's first flagship smartphone. He is a racing enthusiast, and regularly races professionally in Bahrain's SWS races.

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