In Pursuit of Profession: Do presidents create (or erase) jobs?

Repatriation. Tax holidays. The “Penny Plan.” These are just a few of the arrows that President Trump has in his quiver to help boost the economy and create 25 million new jobs over the next decade. Nearly every president in the modern era has also used “job creation” as a talking point during their campaigns. But do presidents really create jobs? Or do they simply govern during a time when innovations are made and new technologies are created that grow the economy, thus mandating the creation of new jobs? And if presidents can and do create jobs, are there ways to do it that will leave a lasting effect on the economy and the country, and not just for a short term bump in the polls?

Back to the future

Here’s a question (and you’re not allowed to look on the Interweb for the answer!): Among Presidents Obama, George W. Bush, Clinton and Reagan, which one had the most jobs created during their presidency? Give up? It was President Clinton. By a large margin. In fact, here are the numbers in millions: Clinton – 21; Reagan – 12.6; Obama – 9.3; Bush- 5.7. (Source: CNN-Money article, Jan 2016) Now, as my college statistics professor told me on the first day of class, “You can make numbers say whatever you want to hear,” we must bear in mind that these numbers need context. We must remember that Clinton wasn’t starting out with a fairly significant recession like Reagan or on the precipice of financial disaster like Obama. We also must consider that the American population had increased by roughly 30 percent, or 70 million people, from the beginning of Reagan’s term to the end of Clinton’s term. So if you consider the “employment to population ratio” President Reagan is actually the big enchilada in terms of job creation (Source: The Washington Post).

It’s the economy, mostly

The employment to population ratio examination notwithstanding, it’s still Clinton that typically gets the kudos for being the “jobs president” in the modern era. While many pundits, professors and politicos have asked the question, “What did Clinton do to create so many jobs?” to get at the true answer, we need to look back in time to see what was going on in America during the 1990s. First, the economy was going gangbusters: from 1992-1995, even with a tax hike in 1993, the economy grew by an average of 3.1 percent a year. From 1996-2000, during which there was a tax cut in 1997, it grew by an average of 4.4 percent a year (To compare, the current economy has been growing in the two percent range for the last couple years). Government spending decreased from 22 percent in 1991 to 18 percent in 2000. Perhaps the biggest contributor to the 1990s jobs creation boom was the enormous investments going into technology, software and business equipment because of the Internet revolution. And how much of the boom during the Clinton presidency was a result of the collapse of the Soviet Union in 1991 that may have made a lot of Americans more optimistic about the future? I know that if I wanted to open a cupcake stand and hire some workers, I’d be a lot more confident about doing so without the threat of nuclear war looming over my head. Goodness knows there’s not a lot of room to duck and cover in those things.

Smoke and mirrors; tax holidays and the geographic divide

The takeaway from this analysis might be that presidents govern for either four or eight years and, during that time, the economy can grow, it can contract, or it can do both. If it grows, jobs are typically created. If it contracts, jobs are typically shed. Presidents can and do claim that jobs were created under their watch when it was often their predecessor that helped set up the pins for them to bowl over. Presidents also claim that they inherited high unemployment or a stagnant economy from their predecessor and use these circumstances to propose ideas such as repatriation of corporate profits or other tax cuts to boost the economy and create jobs. But instead of creating jobs, companies can use this extra money to pay down debt, buyback stock, or buyout rival companies, like they did when the Bush Administration provided a tax holiday in 2004 for US multinational companies (Democrats argued that the top 15 companies that benefited most from this tax holiday actually cut more than 20,000 jobs – Source: Wall Street Journal).

So, at the end of the day, is what presidents do simply smoke and mirrors to let them claim one way or the other about their effect on jobs? And does this conversation take away from other concerns that we should be talking about? The first question has been an ongoing debate that might never get solved. So let’s tackle the second one, which I would argue is much more important.

At 4.7 percent as of Dec 2016, unemployment under Barack Obama is at historic lows (Source –Bureau of Labor Statistics) and near the level of what the Federal Reserve calls, “maximum employment.” But add the context of urban versus rural areas and the employment picture becomes quite alarming. Where employment has gone up 4.8 percent in America’s urban areas from 2007 to 2016, it’s gone down 2.7 percent in rural areas during that same time. Furthermore, according to a May 2016 report from the Economic Innovation Group (EIG), “the U.S. economy is becoming far more reliant on a small number of super-performing counties to generate new businesses. A mere 20 counties accounting for only 17 percent of the U.S. population were responsible for half of the net national increase in business establishments from 2010 to 2014 (Most of these counties contained many of the country’s largest cities and included Collin, Dallas and Tarrant counties). In the 2000s, 64 counties accounted for half of the net increase in business establishments nationwide. The proliferation of new business establishments was even more dispersed in the 1990s, when it took 125 counties to generate half of the United States’ new business establishments. The concentration of half of the recovery’s net new business establishments into only 20 counties represents a massive and historically unprecedented imbalance in the geography of business creation.”

Business creation begets job creation, so this business creation imbalance is causing an imbalance on job creation across the country. The same EIG report states that, “Fifty percent of 2010s job growth accrued to only 2 percent of U.S. counties.” These percentages translate into 9.1 million jobs in 73 counties. Like business growth in the 2000s and the 90s was more dispersed, so was job creation. 120 counties created half of all new jobs in the 2000s, during the 90s, it was 107 counties.

The takeaway, it seems, is that no one person or president, can be held responsible for or praised for creating, or erasing, jobs in an entire country. There are simply too many moving parts. The more responsible question to ask, perhaps, is, much like how the growing wealth divide is affecting our country, how will the growing geographic divide in business development and job creation affect our country moving forward? And what should we all do – government (at all levels), businesses, community leaders, educators, parents, individual Americans – do to reverse this precarious trend?

This story was originally published January 29, 2017 at 9:36 AM with the headline "In Pursuit of Profession: Do presidents create (or erase) jobs?."