What Obama Needs Is a Reagan-Style Recovery In Jobs

I’d be lying if I told you that the “Great Recession” recovery has been strong. It’s been mediocre, however, given the hand Obama was dealt, we could have easily been in a double-dip recession if not for the some of the fiscal and monetary stimulus  that was implemented. However, that’s not an excuse for weak policies. We should have seen stronger fiscal stimulus which would have put us in a better situation right now. However, that was not going to happen with a dysfunctional Washington that’s bought (that’s a whole ‘nother blog). However, let’s take a look at what Reagan’s recession and policies did to kobs and compare them to Obama’s.

The Jobs

I’ve already made the argument that Private Sector Job creation under Obama has been solid (not great but solid) when compared to Bush Jr and the circumstances Obama was put in. Given the fact we had a relatively weak fiscal stimulus package and the bursting of the first nationwide asset bubble since the Great Depression, we could have been in worse shape (However, it could have been better, don’t deny that!).

What has killed Obama overall is the loss in public sector jobs. As you will see in the chart below. Following the previous 3 recessions, public sector jobs also rebounded along with private sector. However, this was not the case this time. Austerity on the state and local levels has shed tons of jobs that were not shed during Reagan’s recovery. In fact, the not only did Reagan stop shedding jobs but he also started adding public-sector jobs by the end of his first term. The state and local governments under Obama are still shedding jobs.

(H/t Mark Thoma For the Chart below)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If Obama follows Reagan’s path, we would be seeing an extra ~600 Thousand people at work by the end of 2012. Not only that but the unemployment rate would easily be below 8% by now with a higher labor participation rate. This doesn’t include any “domino-style effect” that could come with an extra 600K people at work. More people at work means a stronger economy which means more more to be spend which could mean more jobs in the private sector. And in no way can one argue that more public sector job growth hurts private sector job growth. It doesn’t or else Reagan would not have had one of the strongest private-sector job growth post-WW2.

Reagan (Public Sector vs Private Sector)

 

 

 

 

 

 

 

 

 

 

 

 

Like I said earlier, I do not see a recovery in public-sector jobs. State and Local government are still in austerity mode as they are saddled by debt (on average), although I can say that the austerity looks to be in its final stages.

The charts below shows the total number of Government (Federal, State, Local) during Reagan’s first term and Obama’s current term. Unless you expect some major shift to occur in the next 7 months, Obama is likely to have the worst public-sector job total loss on record.

Reagan (1981-1985)

 

 

 

 

 

 

 

 

 

 

 

 

Obama (2009-Present)

(Note: Spike in 2010 is the Census hiring)

 

 

 

 

 

 

 

 

 

 

 

 

Tags: $MACRO 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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