President Obama’s Economy: The Past Eight Years

Now that President Barack Obama is just a couple of weeks away from transferring power to President-elect Donald Trump, news reports are coming out in praise for who will soon be a former president. Recently, I published an article that shows what the employment situation really looks like when we look outside of the confines of the unemployment rate. Let’s apply this concept to the entire tenure of Barack Obama and see exactly how things look comprehensively compared to when he took office.

Civilian Unemployment

The first six months of President Obama’s tenure in office was in the middle of the second worst recession we’ve ever had as a nation, often called “The Great Recession.” The unemployment rate started at 7.8 percent in his first month and the highest it ever was under Obama was 10 percent. Today, it is down to 4.7 percent, which is considered “good” since the optimal level of employment has an unemployment rate of around 5 percent.

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Personally, I think comparing the unemployment rate to the change in the unemployment rate is more interesting. Obviously, the unemployment rate is lower than when Obama took office. But it’s important to remember that it was a lot steadier than the previous two presidencies. The most erratic unemployment rate was during President Bush’s tenure. Of course, this has little to do with “Republicanism” or the war in Iraq. This is evident in Obama and Clinton’s unemployment rates, which either had war or multiple acts of war under both administrations.

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President Obama’s Unemployment Rate

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President Bush’s Unemployment Rate

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President Clinton’s Unemployment Rate

Civilian Labor Force

Under President Obama, the civilian labor force rose from 154,210,000 people to 159,640,000 people.

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Comparing the civilian labor force to total nonfarm payrolls, which measures all employees that aren’t in agriculture, can be confusing at first. According to the Bureau of Labor Statistics (BLS), “Total Nonfarm, commonly known as Total Nonfarm Payroll, is a measure of the number of U.S. workers in the economy that excludes proprietors, private household employees, unpaid volunteers, farm employees, and the unincorporated self-employed.”

At a first glance, one may conclude that we lost a lot of jobs in agriculture under Obama. But that wouldn’t be accurate. While the number of people employed in agriculture is nowhere near all of the other industries, we have actually increased the number of jobs in agriculture. This is shown in the second graph below.

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Labor Force vs Total Nonfarm Payrolls

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Agricultural Labor Force

Civilian Labor Force Participation Rate and Not in Labor Force

This is where the rosy economics of the Obama Administration starts to fade. As I’ve said in the past, it’s never a good thing to have labor force participation down while not in labor force is up. The ideal situation would be to have it the other way around. This is because not in labor force includes people who stopped looking for work, which is a general assumption made when it has an upward trend. Perhaps people gave up looking for work because they didn’t find any value of working part-time just to not afford anything.

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President Obama

Compared to past presidencies, the type of curve that the graph makes is important. President Obama’s graph shows both indicators with linear trends, which isn’t as bad as it could be. For example, President Bush’s labor force participation rate dropped exponentially while President Clinton’s not in labor force increased exponentially. Of course, President Obama’s situation is at least getting a little bit better since labor force participation is starting to increase again.

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President Bush

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President Clinton

Wages of College Graduates

Something President Obama wanted to do was to improve conditions for college students and graduates. The economic indicator I decided to use for this comparison was workers paid below the federal minimum wage for college graduates (bachelor’s degree and higher). The chart below is the same economic indicator shown in two different formats. The first format is a percentage of total people paid below minimum wage and the second format is thousands of persons. The reason behind comparing these two formats is so that we can get a clearer understanding of the situation.

When we first look at the thousands of persons, it’s tempting to believe that everything is okay since fewer college graduates are being paid more than minimum wage. However, what I find troubling is that the percentage of total college graduates being paid below minimum wage is rising. The data for 2016 is not yet available (and won’t be until April).

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How Many Part-Time Jobs Were Added?

There are two ways to look at part-time jobs: Necessity and preference. Preference would be evident in people who usually work part-time. Necessity is evident when people work part-time for economic reasons (usually because they felt like they couldn’t find anything else). Let’s take a quick look at these two charts before I comment on them.

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Increase in usual part-time work

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Economic reasons for part-time work is back to 2009 levels

Overall, the number of normal part-time jobs increased under President Obama. When he first took office, the number was 23,377,000. Last month, that number was 27,895,000. Nearly 4.5 million part-time jobs were added and, according to trendlines, still counting. The good news is that part-time employment due to economic reasons is down. However, this isn’t necessarily a good thing. Whether or not it’s good news, in my opinion, solely depends on whether or not that’s translating to part-time jobs “by preference.” If it is, then people are starting to believe that part-time work is the new norm. I think most of my readers already know that this wouldn’t be a good thing. Overall, I do not believe there were as many part-time jobs added as the political right claims there were.

Inflation

While everyone may flip out about inflation, it actually wasn’t too bad under the Obama Administration. Of course, it was a bit more rampant under President Bush, but President Obama didn’t do as good of a job with inflation as President Clinton did. My reason for saying this is because President Clinton didn’t have as much deflation (where prices actually dip in a negative way) as President Obama did. This is evident when the Consumer Price Index (CPI – the usual measure for inflation) dips below the solid black line into negative numbers. There are two things President Obama’s economy did better: 1) Fewer upward spikes in inflation. 2) President Obama’s overall change in inflation was a little less than President Clinton’s.

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CPI under President Obama

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CPI under President Clinton

Why Not Analyze GDP?

There are two things I will not analyze without a recession that occurred during a presidency: Gross Domestic Product (GDP) and GDP per Capita. The reason being because even if the presidency ends with a downward trend, it will usually be higher than when they took office. This is usually due to the fact that inflation takes place and people then circulate more money by default. Other times, the government will spend more money and more money will go into investments, which pushes GDP up a little. This makes sense because GDP is calculated by adding consumption, investments, government expenditures, and net exports. If you’ve taken macroeconomics, you may have had this presented to you as C+I+G+Xn.

The reason why I will most likely never seriously analyze GDP per capita is because it’s just a gross average. If the government spends more, GDP per capita goes up. If the rich get richer and invest more or spend a wild amount of money, GDP per capita goes up. Instead, I find more economic value in real disposable personal income, both in general and per capita. This is because disposable income per capita is an average of what Americans had available to spend for the year. Let’s take a quick look at this.

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Disposable Income per Capita under President Obama

Overall, under President Obama, Americans had more disposable income. This isn’t surprising since it acts like GDP. As you can see below, the same was true for the previous two presidents. Something that should be addressed is how aggressive the dips were in President Obama’s tenure. Even during President Bush’s worst decline in this indicator, it wasn’t so aggressive.

Over the span of three months, Americans had an average of $1,945 less to spend for the year. Even President Clinton’s worst dip was within the span of one month, like President Obama’s was. But that dip was only an average of $526. President Obama’s worst decline was, as previously mentioned, within the span of one month, but it was even worse than President Bush’s worst three-month dip. President Obama’s dip was $2,423. That January was worse than the previous year’s January, essentially invalidating 2012. It then took Obama’s economy 22 months to recover back to that spike’s level before surpassing it.

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Disposable Income per Capita under President Bush

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Disposable Income per Capita under President Clinton

Welfare

One criticism that is often made towards President Obama is that more people have been put on welfare or social services of some sort under his presidency. I would say that this is a complicated thing to measure because there are so many ways to look at it. We can look at it overall. We can focus on SNAP benefits (Supplemental Nutrition Assistance Program – AKA EBT or Food Stamps). We can focus on jobless claims (filings for unemployment benefits). We can even focus on Medicaid. No matter what you focus on, it all comes down to the big picture: Whether or not more people are receiving social benefits of some sort.

Overall Welfare

A general picture of people receiving social benefits shows that the government spends half of one trillion dollars more per quarter today than when President Obama took office. The past two presidents also had this trend of spending more in social benefits than when they first took office. Is it normal? It seems to be that this is a trend throughout history. But I don’t believe that it was normal during President Obama’s tenure.

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Social Benefit Spending under President Obama

I felt that it would be best to compare this indicator to President Bush’s tenure. The Great Recession started under his presidency and he is often blamed for President Obama’s rough start. President Bush saw an increase in overall social benefit spending by $600.3 billion. More than half of one trillion dollars sounds like a big deal. But the reason why I don’t believe it’s normal under President Obama is because the increase in social benefit spending by the end of his presidency was by $510.2 billion. Yes, this is $90 billion less than President Bush’s tenure. But there wasn’t any excuse for President Obama.

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Social Benefit Spending under President Bush

I’m not excusing President Obama because President Bush had the Great Recession, the worst recession since the Great Depression. In fact, if you look at President Bush’s graph above, you will notice that he has two gray bars. Those shaded bars are recessions. President Clinton had no recessions but his increase in this category of spending was only $208.9 billion. President Obama only had the first half of his first year in office in a recession. What caused this to happen? It’s difficult to say what exactly happened. But Obamacare is a likely factor.

SNAP Benefits

According to the Food and Nutrition Service in the USDA, 10.73 million more people receive SNAP benefits than when President Obama first took office. Under President Bush, this increase was 10.9 million people. Before you start questioning about President Clinton, he saw a decrease of 9.8 million people receiving SNAP benefits. Again, it makes sense under President Bush since his presidency had the worst recession since the Great Depression. Therefore, it doesn’t make sense as to why President Obama’s economy saw a similar increase. Though spending in SNAP benefits is currently down under President Obama (shown below), it is apparent that more people feel that they cannot afford to buy food after eight years of President Obama’s policies. While spending on SNAP is currently decreasing, there are still more people on it than before.

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Medicaid

Medicaid spending is also higher than when President Obama first took office. But this isn’t surprising since Obamacare was implemented. His overall increase in Medicaid spending was $213 billion, which is more than President Bush’s $126.8 billion increase. While one may speculate that more people are participating in Medicaid, another factor that would make Medicaid spending balloon like this would be expanding Medicaid to make it more available or to increase benefits received by those who currently participate in it.

Personally, I think it’s good to have Medicaid around. But many who are on it don’t realize that they should use it whenever they need it, not just wait around and let themselves need a major operation later. This costs much more than it would have for a few doctor visits and prescriptions. On the other hand, while I also love the free market and capitalism, I personally don’t think hospitals and pharmaceuticals should be making much of a profit off of Medicaid.

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Jobless Claims

You have to give credit where credit is due: The number of filings for unemployment benefits has decreased dramatically under President Obama. However, this doesn’t mean that it was all a sincere “Thanks Obama” moment. The upward spike in jobless claims at the beginning of his presidency is never to be blamed on President Obama because that was the aftermath of the Great Recession. Likewise, President Obama shouldn’t be praised for how quickly people stopped applying for unemployment benefits.

I have one concern with this dip in jobless claims. It really comes in the form of a question: Is it due to an increase in social benefit spending? This comes from noticing a large increase in part-time jobs. It’s likely that people have taken part-time work as well as applied for SNAP benefits. A household of three with an income under around $2,100 per month can receive up to $511 per month in SNAP benefits. Since SNAP benefit spending is lower, perhaps people are offsetting insurance costs with Medicaid. Overall, social benefit spending is up and my concern is that people aren’t necessarily better off as much as they’re unsustainably filling in the cracks with social benefits.

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As I’ve previously mentioned, President Obama’s “gaffs” or “brilliant successes” between 2009 and 2011 should be mostly disregarded as the inherited economy. I say this because I personally believe that two years is more than plenty of time to get policies implemented and affecting the economy for better or for worse. The 111th United States Congress was during this time. Many consider this congress to be one of the most productive. Therefore, I believe that, with a Democratic congressional majority, the first two years of “President Obama’s failures” should not be attributed to him as his “successes” during these two years should not be attributed to him nor President Bush. I think it should be viewed as the market trying to balance itself out.

Inherited Economies: Past

I feel like it should be mentioned that we shouldn’t praise the incoming president for success or blame the previous president for the incoming president’s failures. At least, not for longer than the first two years of the incoming president’s first term. I don’t say this because of the boom under Obama or what seems to many as an upcoming bust under Trump. I say this because people are quick to make economic excuses and I’m sick of it. It’s actually unwarranted in a lot of ways.

Don’t blame Bush for Obama’s rough first term. The first two years put Obama’s economy back where it was around the time he first took office. That can be put on Bush’s policies or his economy. However, that huge dip in disposable income per capita happened during what would’ve been President Obama’s last month in office (December 2012 – January 2013) had Mitt Romney won the 2012 General Election. That was completely on Obama and his administration.

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Consumer Confidence

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Consumer Confidence vs Disposable Income per Capita

As you can plainly see, disposable income per capita tends to react to consumer confidence, which makes sense to virtually everyone. While a dip in disposable income per capita isn’t always immediately following a dip in consumer confidence, it almost always occurs after a dip in confidence anyway. Sometimes, it even takes a couple months of a positive upswing in confidence for disposable income to come back up.

Inherited Economies: Future

Now that it’s 2017 and Donald Trump will soon be sworn in as President, there will be a lot of unwarranted praising and criticism. There will likely be a recession at some point after President Trump takes office. But it would be unwarranted to say that it’s because of Trump’s policies or ideas. He shouldn’t be blamed or praised for the next two years, assuming that he doesn’t implement dramatic legislation. President Obama is often allowed praise for bailing out the banks and the automakers in Detroit. But other than that, he shouldn’t be praised or criticized until 2011. The same should apply under President Trump: Much praise or criticism would be mostly unwarranted until 2019.

That doesn’t mean that Trump shouldn’t get any credit. If Boeing really does lower its price of Air Force One for President Trump, then that’s definitely something. If companies really do decide to stay in the US out of hope or confidence under President Trump, he could be praised for that to an extent. Likewise, if Obamacare is repealed and replaced, and a recession happens, then it was inevitable. Any time the government gets that involved  in something and then ripped out to be in the hands of the people again, there is a risk of recession.

With the way things are currently, GDP has seemingly peaked. If you compare the charts below, you will see that even President Clinton, though his economy is often praised by older Democrats, was about to see a recession during his presidency. President Bush was only in office for a few months before that first recession hit (indicated by shaded bars). One can even see towards the end of Clinton’s presidency that GDP was not only plateauing, it was getting ready for a dip.

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GDP under President Obama

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GDP under President Bush

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GDP under President Clinton

Eight Years of Obama: How Are We Now?

After eight years of President Obama, things have improved since he first took office. Much of this was inevitable, since business cycles (booms and busts) are economic occurrences that just happen. But it’s interesting to see that there weren’t any recessions (even small ones) under President Obama. One could speculate that there will be one sometime within the next two years, much like with President Bush. But we won’t know about it for months. Overall, unemployment is low and there are more people looking for work. More college graduates are finding work that isn’t paying minimum wage or lower.

When one examines Obama’s presidency through policy and advocation, it’s clear that the economy wasn’t really his focus in his second term. The first term was more focused on the economy out of necessity. But these last four years have been more focused on social issues. I am confident that he will be viewed as a president that did a lot for social issues. However, there is one major social issue he didn’t seem to take on as much: College tuition. President Obama tried to help soften the blow of student loan debt by lowering the interest rates. But even Elizabeth Warren gets it right every once in a while like when she claimed students should be able to borrow money at rates similar to what private banks borrow money at.

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United States GINI Index (Income Inequality)

The next president will have a lot on his plate, economically, from this presidency. He will need to find a way to get companies to stay in America, a way to get more people into full-time work with benefits, and a way to get people into a more economically independent situation that doesn’t involve unreliable social benefits. He will also have to find a way to help college students and their families tackle the rising cost of tuition. Admittedly, some of this could have been addressed more under President Obama.

Overall, while we are much better off than we were eight years ago, the focus on social issues did not come without an economic cost. Income inequality is on the rise again, more people are working part-time without benefits, and people are working an average of 34.3 hours per week. This is more hours worked per week than when President Obama first took office. But it should be noted that we are back to October 2010 in this regard.

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