The Labor Department’s September jobs report with a decline of 33,000 was the first drop in more than 5 years, with the hurricanes primarily responsible for many of the jobs lost. Regardless of whether they are directly responsible, people often compare Presidents on the number of jobs created, and President Trump is destined to lose this competition with two-term Presidents Clinton (21 million jobs created), Reagan (16 million jobs created), and Obama (11 million jobs created).
Each job ‘created’ requires both a job offer from an employer and an available worker to accept that job, and it is this second condition that will limit the jobs created in the coming years. All three of the previous two-term Presidents started out with a high unemployment rate and a rapidly growing workforce, and Trump has neither of those factors on his side.
In the case of the unemployment rates, all three of the presidents started their terms with a ‘mess’, with unemployment rates of at least 7 percent. However, this also worked to their advantage (especially Clinton and Obama) as those unemployed workers were available to accept the jobs created by an expanding economy. In contrast, Trump began his administration with an unemployment rate of 4.8 percent, so there is relatively little room for improvement given that rate is already close to the level considered to be full employment.
An even larger factor for those prior administrations was the growth in the labor force as women and immigrants added greatly to the pool of available workers. From 1950 to 2000, an average of one million additional women a year joined the labor force, but this rate has dropped by half since the year 2000 since most women are already working. Immigration similarly contributed more than a half a million new jobs on average each year since 1985, but that rate had already begun to slow even before the Trump Administration took office. When you combine these slower inflows with the peak retirement years of the baby boom generation, it is clear that the current economy is very different from the one that added nearly 15 million workers during the Reagan and Clinton administrations, and will severely limit the Trump Administration’s ability to create jobs.
These macroeconomic and demographic trends are largely out of the control of the Trump Administration, but in some cases, his key economic initiatives only worsen the situation. Most directly, he has proposed cuts of 40 to 50 percent in immigration levels over the next ten years. His tax cuts also do not address the key constraint on job growth as the tax cut on business will likely increase the demand for workers, but is not likely to solve the labor supply problem. The primary problem at this point is not a lack of jobs but a mismatch between skills and location of current job seekers and the positions available. Currently, the Bureau of Labor Statistics reports 6.2 million job openings, which is the highest level of unfilled jobs since the index began in the year 2000.
It is also possible that a stronger economy and higher wages will lure back some of those who have dropped out of the labor force. For example, the labor participation rate of working age males dropped during the recession and has only partially recovered even as the unemployment rate had declined. A number of potential causes have been suggested including opioid addition, overly liberal disability programs, and geographic isolation. Unfortunately, the longer that people stay out of the labor force, the more their skills deteriorate, and many of these workers have stayed out during the longest expansion in U.S. history, so it seems unlikely that they will be able to return to work without retraining or other assistance.
Instead of addressing this mismatch between the available workers and jobs, Trump’s 2018 budget proposal proposed cuts of 20 percent to the Labor Department and 13 percent to the Department of Education. The Labor Department programs include a number designed to assist dislocated workers in making the transition to new occupations with a more promising outlook. Some of the Education programs include support for low income student loans, technical education, as well as literacy.
Just as Trump is not responsible for the jobs lost due to the hurricanes, the slower job growth likely in coming years is largely out of his control. However, we should expect policies that are designed for the current economy, which means expanding the labor force to assist employers and assisting the workers that are still on the sidelines and trying to get in the game.
Loren Yager, Park City, formerly served as the chief economist of the Government Accountability Office, the investigative arm of Congress.