Monday, January 2, 2017

2/1/16: Remember that America's Scariest Chart?


As promised in the previous post, here is a look at yet another wrinkle in the U.S. jobs creation saga. The following used to be referred to as the America's Scariest Chart some years back, until all analysts stopped tracking it. Well, all, save for myself - and for a good reason.

Since the election of Donald Trump, the U.S. media has been full of praise for President Obama's record on economic recovery, setting the stage for an argument that Trump Administration is about to inherit a very strong economy, the one that, in mainstream media's minds, Trump is likely to mess up.

So lets do a simple exercise. Take current level of employment (non-farm payrolls) and compare it to the pre-crisis average levels of employment. Represented as an index, this comparative can be performed for every recession since the end of WW2. Chart below illustrates the results:


As the chart above clearly shows:

  1. Today's employment figures represent the worst recovery from a recession on record (for any terminal point of previous recoveries, current recovery is associated with lower employment levels).
  2. Even stretching time of this recovery to present day - yielding the second longest period of a recovery since 1945, after the 1990 episode - current recovery is still the worst performing one.
  3. Looking at the slope of the 2008 line, increases in employment relative to pre-crisis situation are weaker in the current post-crisis recovery than in every other recovery, except the 2001.
Now, this is not to put the blame for the weak recovery on the shoulders of President Obama. Presidential policies have little short term impact on unemployment and it takes cooperative Congress to structure and enact longer-term policies. But this does dispute the media-promoted view of the U.S. labour markets are being in rude health. President-elect is not about to inherit a spotless jobs market from his predecessor. America's Scariest Chart still confirms as much.

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