That last major grade on the performance of the economy under former President Barack Obama is in. Let’s call it a B.
The jobs report for January, based on surveys conducted during Obama’s last month in office, shows that employers created 227,000 jobs during the month, which was well above economists’ forecasts. The unemployment rate is now 4.8%, a level just about any president would love to claim as a legacy. During Obama’s 96 months in office, the economy added 11.5 million jobs, for a monthly average of 120,000. That’s low, but it includes Obama’s first 14 months, when the recession he inherited killed about 4.3 million jobs, a hole the Obama economy didn’t climb out of until 2012.
There’s one glaring weakness to the Obama recovery: Wages fell for many Americans during the last 8 years, and new jobs created after the recession didn’t pay as well as the jobs lost during the downturn. Data from Sentier Research shows that median household income, adjusted for inflation, was almost the same at the end of 2016 as when Obama took office in January 2009. That means the typical family has made no financial progress during the last 8 years. And January’s data shows the average hourly paycheck rose just 3 cents from December and 2.5% during the past year. Many ordinary people feel like they can’t get ahead, and the numbers prove they’re right.
These charts tell the story of the Obama recovery. First, here’s total employment:
Annual percentage growth in hourly earnings:
Obama supporters give him credit for steering the country out of a grueling recession, while critics blame him for an unusually weak recovery. Both sides overstate their case. Like George W. Bush before him and Trump after him, Obama had to deal with profound economic changes that are hard for any president to control, such as an aging population and a technology revolution making many types of jobs obsolete. Besides, for six of his eight years in office, Obama faced a Republican-controlled Congress determined to thwart his economic priorities.
Trump begins his first term with strong momentum on jobs, with most economists predicting a continued recovery. And wage growth is picking up slightly, which could foretell better gains during the next couple of years, as labor markets tighten and employers have to pay more to get the workers they want.
But the Trump economy could stumble, too. Some of his big proposals, such as tax breaks and regulatory reform, could boost growth, at least for a year or two after they go into effect. But if tax cuts add substantially to the national debt, it could push inflation higher than desired and depress growth.
The biggest downer in Trump’s economic plan is the threat of new “border taxes” on imports. The idea is to make imports more expensive, to encourage more domestic manufacturing. But price hikes on many everyday products subject to the tariffs would come first. If new jobs materialized, it wouldn’t happen for months or years, while higher prices ate into living standards, especially for low-income workers. Meanwhile, other nations could impose their own tariffs on US imports, producing trade wars that weaken the overall economy rather than strengthening it.
Trump might just be bluffing about border taxes, as a way to get other concessions. Yet by trying to create more of the manufacturing jobs that might have supported a family 30 years ago, he may be chasing a mirage. Many experts say relatively unskilled workers doing manual labor will never earn decent wages in the future, since there’s an oversupply of such workers and machines will replace many of them anyway. So Trump needs a Plan B for the economy, and probably a Plan C to deal with unexpected crises and inevitable disruptions. After a few years tangling with the real-world economy, Trump may think Obama did a pretty good job.
Editor’s note: This story has been updated to correct a math error; the economy added an average of 96,000 jobs per month under Obama, not 191,000.
Confidential Newman tip line: email@example.com
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.