July 30, 2004

'Worst Recovery Ever' and Other Lies

Time and time again I've heard from disgruntled Democrats that the economy is doing horribly. Others might begrudgingly admit that the economy is improving, but that somehow we are worse off now than we were under Bill Clinton. Despite multiple indicators showing a robust economy and a strong jobs market, Democrats continue to peddle the line that this is the worst economic recovery in memory.

According to John Kerry's official website:

America is still in the worst job recovery since the Great Depression, with 1.9 million private-sector jobs lost in the Bush presidency
Is this charge true? And if it is, should we worry about it? Let's discuss this statement, weed fact from fiction, and try to place the present economic recovery in historical perspective. In the process, we might learn a thing or two about how statistics work and why they can be misused. Indeed, this statement shows why the old axiom about "lies, damn lies, and statistics" has had such widespread appeal for so many for so long.

The statement first makes a claim: "Worst job recovery since the Great Depression¯". That's a pretty big claim. First, notice that the statement admits that we are in an economic recovery, a fact pretty hard to deny. Notice the caveat, though, that somehow economic recoveries of bygone days were much better.

The second part of the statement tells us how they came to that conclusion: $1.9 million private-sector jobs lost in the Bush presidency¯. So, if I am getting their methodology right, they simply took the number of unemployed people at the beginning of Bush's Presidency and subtracted the number of people unemployed at the end of the Bush Presidency. From The US Bureau of Labor Statistics we get the following:

Feb 2001: 6523000
Jun 2003: 8616000
= 2.1 million

Wow, that number is even better for Kerry as it is slightly higher than the number his campaign keeps throwing out there! And, indeed, it is true. There are 2 million more people today who are unemployed than when George W. Bush became President. But what do these numbers mean and do they prove that this is the worst job recovery since the Great Depression?

Ok, it doesn't look good so far, but if their methodology is as I am assuming it is, we must get the following table:


So, using the simplest methodology imaginable, simply seeing whether or not the total number of civilians (hence accounting for the modifier used by Kerry of "private sector" who are considered unemployed rises or falls from the first month of a President's term to that last month of his term, we see that the claim can't possibly be true. Nixon II/Ford has the current President licked by 700k and W's father by nearly 400k!

By this standard the statement that we are in "the worst job recovery since the Great Depression"¯ is clearly false.

But let's not jump the gun yet. Perhaps they had some other methodology they used to justify how an increase in the unemployment rate of 2 million is the "worst job recovery since the Great Depression."¯ Let's look at the seasonally adjusted civilian unemployment rate, instead. Perhaps what is meant is that this recovery is not as robust as others because somehow the unemployment rate has not fallen as fast as in times past.

Another methodology might be to take the highest rate of unemployment during a Presidency, and then compare that to the rate of unemployment when that President left office or when his term expired. The following table represents just that:


From this we see that this is not the "worst job recovery since the Great Depression”even if we lay aside the odd 1.9 million unemployed number that is used to justify this statement. Presidents Carter and Bush I both had recoveries which were not as robust as the one we are currently in. Further, the above figures make the whopping assumption that the unemployment rate for June 2003 will continue for the next six months!

If we were to drop that assumption, and compare recession recoveries at this same point in a Presidents term, we would get the following table:


Using this method we would have to add Nixon's first term to the list of recoveries worse than the current President Bush's. Clearly, when the Democrats are talking about this being the worst recovery since the Great Depression they can't be using any numbers even related to the unemployment rate!

Ok, so what! It's still pretty bad, isn't it? Why can't it be like the good old days when an economic recovery meant everyone has a job?

A few other observations are in order that might put the present jobless recovery in perspective.

In November and December of 1982 the unemployment rate hung at 10.8%. Those were some pretty bad times, and the country pinned the blame on Ronald Reagan. Of course, we all know how that turned out, don't we? Ronald Reagan is celebrated for having overseeing one of the greatest expansions in the US economy ever. But what was the unemployment rate when he left office? In January of 1989, the month he left, the unemployment rate was 5.4%.

Wait a minute. Hold on. At the height of the greatest economic expansion ever the unemployment rate was only .2% higher than in today's jobless recovery? How can that be?

Other examples also illustrate the point. Let's not forget about the Bush I Recession and the Bill Clinton Miracle Economy. Remember the last time a Democratic nominee talked about the worst economy since the Great Depression In June of 2002 the unemployment rate was 7.8 percent. In January of 2001, the month Bill Clinton left office, the unemployment rate was an astounding 4.2%!!

Wow, those are some good numbers and certainly the unemployment figures seem to indicate that the economy, under Bill Clinton, was much better than under Reagan.

But let's take a baseline for comparison. If Clinton and Reagan are to get credit for helping to create jobs, then we have to look at the relative gains made under each man's policies.


So, the Reagan Recovery was, in fact, greater than the Clinton Recovery in alleviating the unemployment rate. We can see the reason why Reagan's unemployment rate dropped 1.8% more than did Clinton's because the recession that he was fighting was so much worse!!

Had the unemployment rate under Reagan fell by the same margin as it did under Clinton, the unemployment rate would have been 7.2% in 1989--far higher than Bush II's unemployment rate would ever reach!

Clinton's economy produced some marvelous job growth, but then again, the economy Clinton inherited was not as bad as he made it out to be. I am not a Clinton hater, but I can't, in all honesty, give him the credit that some wish to laude upon him. It would be like calling Phil Jackson the greatest basketball coach in history forgetting the fact that he inherited teams with Neil or Jordan and ignoring the many other coaches that inherit losing teams, only to turn them around and take them to the playoffs. Baselines matter.

Now let's add both the Bush Recession and the Bush Recovery into the equation:


Wow, not very stellar, then again Bush would need another 4.5 years in office to make the comparisons fair!

In fact, we see that (assuming no change, and that is assuming a lot) President Bush's unemployment rate is only 0.3% higher than the unemployment rate at the end of Clinton's his first term!

It is also better than Reagan's unemployment rate after his first term. Remember, Reagan took the Presidential oath for the second time with an unemployment rate of 7.3% looming over his head--the unemployment rate is lower than that today and never got that high even in the depths of the last recession. If we want to use the Democrats fuzzy logic, we could say that Bush's recovery is even better than Reagan's! And technically, we would be telling the truth.

See why baselines are important?

Ok, you say, but Kerry's people aren't comparing unemployment rates, they are comparing the absolute number of unemployed people and that is something entirely different.

Well, we've already been through that argument and disproved it. However, the statement is much more misleading than it appears at first glance. You see, as difficult as it is to make relative comparisons between recoveries based on the unemployment rateā€”it is even harder to make the comparison based on absolute numbers of unemployed.

Why?

First, think of the absolute number of people who live in the US now compared to 1939ā€”the year the Great Depression finally ended. According to the US Cennsus Bureau, in 1940 there were 132 million people in the USā€”but by 2000 there were 280 million! How can it possibly, under any imaginable reasonable standard of truth, be fair to compare the absolute number of jobs gained today to those gained at the end of the Great Depression when there are over twice as many people living in the US today than there were in 1940?!?! Itā€™s mind boggling.

When one wishes to compare the number of jobs created, or lost, or whatever, keep in mind that there are more TOTAL people today. In 1940, if 1.3 million people lost their jobs, that would mean that 1% of the (total) population had become unemployed. However, if 1.3 million people lose their jobs today that would mean only .45% of the (total) population had become unemployed.

So, when Kerry's people compare this recovery to that of, say, the Reagan recovery, it is important to note that there are now 30 million more people living in America than there were in 1990 and over 60 million more than in 1980!!

Under no reasonable standard of statistical measurement can the statement that America is still in the worst job recovery since the Great Depression¯ be upheld. None!

The unemployment rate goes up, and it goes down. At present, it is going up. But even in the worst months of the past recession, unemployment never really rose very much.

Are the Democrats lying? Well, maybe not. I suppose that someone came up with the statement erroneously and now it has become conventional wisdom to the Inside the Beltway crowd. These things tend to take on a life of their own and get passed on as truth by people in good faith. So, maybe they aren't lying, but neither are they telling the truth.

Remember, it's not a lie if you believe it yourself.

By Rusty Shackleford, Ph.D. at 03:26 AM | Comments |