The Bureau of Labor Statistics (BLS) reveals that employers (in the nonfarm sector) have created 201,000 jobs in August 2018, plus the unemployment rate remains steady at 3.9 percent low. This is one indication that the U.S. economy is flourishing.
Given the strength of the economy, partisans are debating whether former president Barack Obama or current president Donald Trump should get the credit.
During one of his campaign rallies in North Dakota, Trump claims that he’s the reason the present economy is doing well. His predecessor, Barack Obama, however, reminds people that the country’s economy started to recover while he was still the head of state.
Obama emphasizes how glad he is that the economy continued to grow after he left office. From his point of view, and from what Republicans describe as a miracle, like the number of jobs, is nothing new. He substantiated this in a speech at the University of Illinois on September 7, sharing that the job numbers were the same in 2015 and 2016.
The Obama Administration: Surviving the Financial Crisis
Obama assumed office when the country was facing the worst financial crisis since the Great Depression. In his first year as a president, the country lost over four million jobs, along with other four million jobs lost in the administration before him.
The unemployment rate was high at 7.8 percent when Obama started his term, which rose to 10 percent in October 2009. But after two years of his presidency, the number of Americans with no jobs slowly dropped below 9 percent.
He left the office with 3 percentage points in the unemployment rate. It took a while before the unemployment rate dipped that low, though. But overall, the Obama administration had a 7.7 percent median unemployment rate, which was the highest after the World War II.
In his eight-year term, the economy generated a net total of over 11.6 million jobs. The nonfarm payroll employment rate has increased by 8.7 percent, as well. Additionally, the median weekly earnings of all employees rose by 4 percent after inflation.
The Trump Administration: Building on His Predecessor’s Achievements
Since the U.S. administration shifted from Obama to Trump in February 2017, the country’s economy created almost 1.7 million jobs. Instead of crediting the people, businesses, or the economy, President Trump takes the credit for himself saying, “I’ve created over a million jobs since I’m president.”
This employment boom, however, is a part of a multiyear trend that began in 2010.
Trump constantly highlights that the unemployment rate during his term was at a 17-year low. Furthermore, he even invalidated the unemployment rate before he took office, referring to it as false data.
Trump had the advantage of starting off with a low unemployment rate, which he inherited from his predecessor. When he took the oath of office in January 2017, the rate was at 4.8 percent.
The Gross Domestic Product (GDP) rate under the Trump administration also showed some growth; growth in GDP is an indicator of a healthy economy.
In fact, the second quarter GDP growth in 2018 increased by 4.1 percent from 2.2 percent from the first quarter of the year. This economic boost is the highest since the 5.1 percent in June 2014’s quarter result.
Who is Responsible for the Economic Growth?
James Bullard, president of St. Louis Federal Reserve Bank (FRB), thinks that Trump should get the credit for the positive condition of the U.S. economy. For him, the change in administration contributes to such growth. He adds that the current government is pro-business, promoting strategies that focus on economic growth.
Bullard believes that the present economy can sustain a 2-percent annual growth rate. He encourages the FRB not to raise interest rates due to potential inflation surge, but his argument failed to convince many of its officials.
It is worth noting that the trends that Trump boasts started during the Obama administration. Meaning, the current economic growth actually started before Trump assumed office.
The U.S. economy may face a downturn in the next two years, according to the founder of Bridgewater Associates, Ray Dalio. He explains that the impact of President Trump’s tax cuts will begin to fade in 18 months. As a result, the increasing interest rates and growing costs from pension and healthcare may put pressure on the budget.
Dalio further shares that the Federal Reserve has to print more money to cover the loss of Treasuries because it can’t meet the country’s borrowing needs. This can depreciate the value of the dollar by 30 percent.
America witnessed significant economic growth under Obama and is now experiencing a similar environment in the Trump administration. The success of the economy, however, should not be just about who sits in the Oval Office. Rather, credit should also go to the people, businesses, or technology that helped contribute to the economic boost. Succeeding state leaders should build on the positive results of their predecessor to maintain a healthy economy.