During Ronald Reagan's presidency, the U.S. economy created 18 million new jobs. During Bill Clinton's two terms, that figure was 22 million. So how are our 21st century presidents doing?
Before 2008, the George W. Bush administration cited figures of 6 million. By the time, he left office it was closer to 3 million. And Obama? His economists like to cite the figure of 1.8 million private sector new jobs since the recession ended, conveniently ignoring all the job slashing in the public sector.
However you slice and dice the numbers, the absence of job creation over the last 11 years is startling. Watching Rick Perry and Mitt Romney trade barbs during last night's Republican presidential debate brought home how this plays out at the state level.
After Perry noted that Massachusetts under Michael Dukakis created jobs at a rate three times faster than it did under Romney, the Mitt man retorted that Texas created jobs at a much faster rate under George W. Bush and Ann Richards than it did under Perry. Romney added that for Perry to claim credit for the 800,000 new jobs in Texas since the so-called recovery began is like Al Gore claiming to have invented the Internet.
Something much larger is happening to the economy than politicians exchanging insults. Clearly Reagan and Clinton were far more interested by-and engaged in-economics than Bush and Obama, but the dynamics of the labor market has fundamentally changed so much that its impact dwarfs the actions of politicians.
A recent paper by Northwestern University economist Robert Gordon sheds some light on this jobless recovery. A persistent "double hangover" effect arising from an excess supply of housing combined with a refusal of consumers to spend at their past levels are causing the shortage of jobs.
Another factor is the changing balance of economic power between management and labor. Over the past two decades, Gordon says U.S. management has grown increasingly assertive and aggressive when it comes to firing workers when profits decline.
"While the decline in business activity in the U.S. was no larger than in Europe, the U.S. is an outlier in its outsized response of the unemployment rate to its decline of output," Gordon writes, citing the IMF.
Gordon notes that the housing-led recovery from 2001 through 2007 was an anemic expansion from the viewpoint of employment. The employment-to-population ratio, something akin to labor force participation, fell from 64.3% in the first quarter of 2001 to 62.8% in the fourth quarter of 2007. "The seemingly minor 1.5% drop in the ratio represents more than 3.6 million 'missing' jobs-even before the recent recession," Gordon explains.
Today, that ratio is down to 58.1%. Using the 2007 employment-to-population ratio as a yardstick translates into 10.4 missing jobs. Applying the 2001 ratio turns into 14.1 million missing jobs.
What explains this disposable worker phenomenon? Gordon cites four factors -- weak unions, a lower real minimum wage, competition from imports and competition from low-skilled immigrants. Lost spending, he explains, contributes to lost jobs.
I'd like to add another. Our self-destructive immigration policy allows the smartest foreign students to obtain graduate science and engineering degrees from the MITs and Cal Techs of our country and then forces them to return to India or wherever. There, they start companies that create thousands of new jobs. Unfortunately, all too many Americans who get those same degrees wind up on Wall Street creating algorithms, not businesses.
I don't expect politicians to solve any of this. Some might even question if it's their job.