The
Bureau of Labor Statistics (BLS) today issued America’s latest jobs
report covering August. And it’s a disappointment. The economy created
an
additional 142,000 jobs last month. After 6 consecutive months over 200,000, most pundits expected the string to continue,
including ADP which just yesterday said 204,000 jobs were created in August.
One month variation does not change a trend
Even though the plus-200k monthly string was broken (unless revised
upward at a future date,) unemployment did continue to decline and is
now reported at only 6.1%. Jobless claims were just over 300k; lowest
since 2007. Despite the lower than expected August jobs number, America
will create about 2.5 million new jobs in 2014.
And that is great news.
Back in May, 2013 (15 months ago) the Dow was out of its recession doldrums and hitting new highs. I asked readers
if Obama could, economically, be the best modern President?
Through discussion of that question, the #1 issue raised by readers was
whether the stock market was a good economic barometer for judging
“best.” Many complained that the measure they were watching was jobs –
and that too many people were still looking for work.
To put this week’s jobs report in economic perspective I reached out to
Bob Deitrick, CEO of
Polaris Financial Partners and author of “
Bulls, Bears and the Ballot Box” (which I
profiled in October, 2012
just before the election) for some explanation. Since then Polaris’
investor newsletters have consistently been the best predictor of
economic performance.
Better than all the major investment houses.
This is the best private sector jobs creation performance in American history
Bob
Deitrick – “President Reagan has long been considered the best modern
economic President. So we compared his performance dealing with the
oil-induced recession of the 1980s with that of President Obama and his
performance during this ‘Great Recession.’
As this unemployment chart shows, President Obama’s job creation
kept unemployment from peaking at as high a level as President Reagan,
and promoted people into the workforce faster than President Reagan.
President Obama has achieved a 6.1% unemployment rate in his 6th
year, fully one year faster than President Reagan did. At this point in
his presidency, President Reagan was still struggling with 7.1% unemployment, and he did not reach into the mid-low 6% range for another full year.
So, despite today’s number, the Obama administration has still done
considerably better at job creating and reducing unemployment than did
the Reagan administration.
We forecast unemployment will fall to around 5.4% by summer,
2015. A rate President Reagan was unable to achieve during his two
terms.”
What about the Labor Participation Rate?
Much has been made about the poor results of the labor participation
rate, which has shown more stubborn recalcitrance as this rate remains
higher even as jobs have grown.
Bob
Deitrick: “The labor participation rate adds in jobless part time
workers and those in marginal work situations with those seeking full
time work. This is not a “hidden” unemployment. It is a measure tracked since 1900 and called ‘U6.’ today by the BLS.
As this chart shows, the difference between reported
unemployment and all unemployment – including those on the fringe of the
workforce – has remained pretty constant since 1994.
Source: Bureau of Labor Statistics – Databases, Tables and Calculators by Subject
Labor participation is affected much less by short-term job creation, and much more by long-term demographic trends. As this chart from the BLS shows, as the Baby Boomers entered the workforce and societal acceptance of women working changed, labor participation grew.
Now that ‘Boomers’ are retiring we are seeing the percentage of
those seeking employment decline. This has nothing to do with job
availability, and everything to do with a highly predictable aging
demographic.
What’s now clear is that the Obama administration policies have
outperformed the Reagan administration policies for job creation and
unemployment reduction. Even though Reagan had the benefit of a growing
Boomer class to ignite economic growth, while Obama has been forced to
deal with a retiring workforce developing special needs. During the 8
years preceding Obama there was a net reduction in jobs in America. We
now are rapidly moving toward higher, sustainable jobs growth.”
Economic growth, including manufacturing, is driving jobs
When President Obama took office America was gripped in an offshoring
boom, started years earlier, pushing jobs to the developing world.
Manufacturing was declining in America, and plants were closing across
the nation.
This week the Institute for Supply Management (ISM) released its manufacturing report, and it surprised nearly everyone.
The latest Purchasing Managers Index (PMI) scored
59, 2 points higher than July and about that much higher than
prognosticators expected. This represents 63 straight months of
economic expansion, and 25 consecutive months of manufacturing
expansion.
New orders were up 3.3 points to 66.7, with 15 consecutive months of
improvement and reaching the highest level since April, 2004 – 5 years
prior to Obama becoming President. Not surprisingly, this economic
growth provided for 14 consecutive months of improvement in the
employment index. Meaning that the “grass roots” economy made its turn
for the better just as the DJIA was reaching those highs back in 2013 –
demonstrating that index is still the leading indicator for jobs that it
has famously always been.
As the last 15 months have proven, jobs and economy are improving, and investors are benefiting
The stock market has converted the long-term growth in jobs and GDP
into additional gains for investors. Recently the S&P has crested
2,000 – reaching new all time highs. Gains made by investors earlier in
the Obama administration have further grown, helping businesses raise
capital and improving the nest eggs of almost all Americans. And laying
the foundation for recent, and prolonged job growth.
Bob Deitrick: While
most Americans think they are not involved with the stock market,
truthfully they are. Via their 401K, pension plan and employer savings
accounts 2/3 of Americans have a clear vested interest in stock
performance.
As this chart shows, over the first 67 months of their
presidencies there is a clear “winner” from an investor’s viewpoint. A
dollar invested when Reagan assumed the presidency would have yielded a
staggering 190% return. Such returns were unheard of prior to his
leadership.
However, it is undeniable that President Obama has surpassed the
previous president. Investors have gained a remarkable 220% over the
last 5.5 years! This level of investor growth is unprecedented by any
administration, and has proven quite beneficial for everyone.
In 2009, with pension funds underfunded and most private
retirement accounts savaged by the financial meltdown and Wall Street
losses, Boomers and Seniors were resigned to never retiring. The nest
egg appeared gone, leaving the ‘chickens’ to keep working. But now that
the coffers have been reloaded increasingly people age 55 – 70 are
happily discovering they can quit their old jobs and spend time with
family, relax, enjoy hobbies or start new at-home businesses from their
laptops or tablets. It is due to a skyrocketing stock market that
people can now pursue these dreams and reduce the labor participation
rates for ‘better pastures.”
Where myth meets reality
There is another election in just 8 weeks. Statistics will be
bandied about. Monthly data points will be hotly contested. There will
be a lot of rhetoric by candidates on all sides. But, understanding
the prevailing trends is critical. Recognizing that first the economy,
then the stock market and now jobs are all trending upward is important –
even as all 3 measures will have short-term disappointments.
There are a lot of reasons voters elect a candidate. Jobs and the
economy are just one category of factors. But, for those who place a
high priority on jobs, economic performance and the markets the data
clearly demonstrates which presidential administration has performed
best. And shows a very clear trend one can expect to continue into
2015.
Economically, President Obama’s administration has outperformed
President Reagan’s in all commonly watched categories. Simultaneously
the current administration has reduced the deficit, which skyrocketed
under Reagan.
Additionally, Obama has reduced federal employment, which
grew under Reagan (especially when including military personnel,) and
truly delivered a “smaller government.” Additionally, the current
administration has kept inflation low, even during extreme international
upheaval, failure of foreign economies (Greece) and a dramatic
slowdown in the European economy.
Connect with me on LinkedIn, Facebook and Twitter
Links:
History says Democrats are better at growing the economy than Republicans
Investor returns have been better during Obama administration than any other presidency
Why Wall Street forecasters have consistently missed the Obama market run-up
