I’ve done posts about the deficit and the stock market. Let’s round out the economic-themed posts for a while and talk about the unemployment, underemployment, and labor participation rates. All of these indicators are important, but none of them tell the whole story. Note: Graphs and data are all based on official data from the US Bureau of Labor Statistics.
The endlessly-hyped official U-3 Unemployment Rate is the percentage of the American workforce who are jobless but are actively seeking employment. It’s generally a decent indicator — not necessarily of economic health, but changes over time. As it goes down, things are usually getting better, and vice versa. It’s simplistic, but a good shorthand. During the Obama presidency, right after the Great Recession in 2008, unemployment went down steadily for a record period. The rate continued to fall under Trump.
The unemployment rate is one of Trump’s most prolific points to brag about, particularly in terms of the Hispanic and Black unemployment rates, both of which reached record lows during his presidency. He is right to brag about that — it’s a sign that SOME things are getting better for minorities in this country — though it’s worth noting that he didn’t actually do anything to specifically help those groups compared to any other group, so much of the credit likely lies elsewhere for those stats. Sort of a “high tide raises all ships” situation.
So how did Trump compare to Obama? Trump got the lowest, but if you look at the graph, it’s pretty clear that he grabbed the baton right before the finish line. The decline in unemployment continued at almost exactly the same rate as it had for years under Obama. Under Obama, the unemployment rate topped out at 10% and was down to 4.7% when Trump was sworn in. Before COVID, it got down to 3.5%. Then COVID hit. Unemployment spiked to 14.7%, and has now corrected back down to 8.4%.
The better economic indicator is the U-6 Unemployment rate, more accurately referred to as the Underemployment rate. It’s a much better indicator for the health of the job market and the economy. Though it tracks closely with the unemployment rate, it takes into account people who have stopped looking for work or who are working part time and can’t get a full-time job. In other words, it’s a better look at how much of the workforce is struggling. At the height of the recession, it hit 17.2%. At the height of COVID, 22.8%, now corrected back to 14.2%. Which is to say that more than a fifth of the American workforce was underemployed in April.
But don’t stop there. The third indicator, my favorite, is the labor participation rate. It tracks the percentage of people who ARE engaged in the labor market. This is the one nobody wants to talk about (unless your name is Andrew Yang). In the last twenty years, it has been steadily falling. Along with the sustained decline in the unemployment rate under Obama the participation rate fell with it. That’s REALLY BAD NEWS. When there are fewer unemployed people, the participation rate should go up, right!?!? It means workers are disappearing, jobs are disappearing, and they’re not coming back. As Yang would tell you, automation is coming for everything. Now with COVID, that reality has accelerated “bigly.”
So what does it all mean? It means that Trump has been just about as good for your job prospects as Obama was, though Trump was able to take more of the credit. It means that there are underlying problems with the economy that we aren’t addressing and are just waiting to explode. Some already have in the world of COVID. So again, when Trump says he built the best economy in the history of the world, he’s lying. Again. He just didn’t screw up the great labor market he was given. Until he did (more on that later).