Friday’s jobs report represented the first official wrap-up of President Barack Obama’s legacy on the nation’s economy. But from the Affordable Care Act to zombie banks, Obama had no shortage of opportunities to make economic history. Few would argue that he did so, although whether those efforts were for better or worse remain hotly contested.
“If you look at any number of different measures, most have recovered to pre-recession levels,” said Mark Hamrick, senior economic analyst at Bankrate.com.
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The economy has made significant strides from where it was eight years ago, but the resentment of a large swath of the population — notably, lesser-educated whites — who felt as if the recovery skipped them led to an outpouring of populist support for Donald Trump in the presidential election.
From Recession to Recovery
The economy President Obama inherited was in peril. When he took office in January of 2009, the United States was in the worst recession it had experienced since the Great Depression. Nearly 600,000 American workers lost their jobs in that month alone, and the unemployment rate was creeping up towards 8 percent (it would eventually top out at 10 percent that October).
But by December 2016, the Bureau of Labor Statistics reported that 178,000 jobs were created the previous month, bringing the unemployment rate to 4.6 percent, the lowest since August of 2007.
Elise Gould, senior economist at the Economic Policy Institute, said the Obama administration’s fiscal stimulus plan deserves credit for getting millions of Americans back to work, and for shoring up the safety net for the many remaining unemployed.
“Making those investments in infrastructure spending absolutely added jobs, not only in construction, but that also multiples out in all the fields that contribute to those industries,” she said, such as equipment manufacturing.
“The other part was providing aid to states,” she said, through measures like extended unemployment insurance available for displaced workers.
In a 2015 research paper, the Center on Budget and Policy Priorities calculated that the extraordinary measures the Obama administration took in the aftermath of the financial crisis, from stimulus spending to bailouts for insurance giant AIG, the financial and automotive industries, stemmed even greater losses in employment and GDP.
It estimated that GDP would have declined by nearly 14 percent, and unemployment would have climbed to almost 16 percent (compared to 4 percent and just under 11 percent, respectively).
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“There probably was some healing that would have occurred nevertheless,” Hamrick said.
But Peter Cardillo, chief market economist at First Standard Financial, said monetary policy should get more credit for lifting the economy out of the recession. “In all fairness, most of the credit goes to the Federal Reserve, not necessarily Obama… for keeping the economy in a positive direction by keeping lower interest rates,” he said.
Some economists even contend that the pace of the recovery was slowed by cutbacks in government spending and a divided Congress’s inability to make infrastructure spending (a key and early plank of Donald Trump’s plan to rev the country’s economic engine) a priority.
Others argue that the economy would have rebounded faster and more vigorously if new business regulations, particularly in the financial services sector, hadn’t been imposed as a condition of banks’ accepting bailout funds.
“Certainly the economy remains less healthy than it was in previous business cycles,” said Scott Greenberg, an analyst at the Tax Foundation. “If you’re measuring success by how well has tax and spending policy done to produce economic growth… growth has been slow, private investment has been static,” he said.
Stifel Fixed Income chief economist Lindsey Piegza blamed regulatory scrutiny and uncertainty surrounding Affordable Care Act implementation for keeping corporate investment on the sidelines.
“One of the missing components from the recovery has been business investment,” she said. “Three lingering themes as barriers to entrance [are] ample regulation, tax uncertainty, and rising healthcare costs.” Although consolidation and M&A activity took place at a brisk pace, especially in the financial sector, Piegza argued that this was reflective of underlying weakness rather than companies operating strategically from a position of strength.
“This was more a reflection of the fact that businesses were trying to simply survive,” she said.
Other economists say that the financial regulatory measures imposed in the aftermath of the crash, including making banks shore up their reserves and submit to “stress tests,” fostered greater stability and confidence among risk-averse investors and institutions.
High-Tech Task Force
Aside from policy decisions, the rapid acceleration of technological advancement can’t be overlooked in shaping today’s economy, said Harry Holzer, a professor of public policy at Georgetown University.
“The real biggest losers have been men with only high school diplomas or less, who grew up expecting they could inherit these pretty well-paying, blue-collar jobs, and those jobs were the ones that sort of disappeared,” he told NBC News.
Although Donald Trump played on this group’s fear and resentment around immigration and the shift of manufacturing to other countries, Holzer said this doesn’t reflect the reality of why the bottom fell out for this group’s job prospects. “A lot of it has to do more with technology than globalization,” he said.
When President Obama was first elected, the iPhone had only been around for one year and Twitter for two, Facebook wouldn’t go public for another four years, and now-significant high-tech “disruptors” like Uber and Square didn’t exist yet.
“The world has gotten different in the last decade everything from all the new social media and the whole app economy. We really don’t know how all that’s going to play out,” Holzer said.
The Bottom Line
Regardless of what policies a unified GOP White House and Congress roll out or what regulations they roll back, secular changes will continue to pose challenges, market observers caution. The weak global economy, which kept a brake on economic growth for much of Obama’s tenure, remains a challenge, and in spite of Donald Trump’s highly publicized push to keep manufacturing in the United States, globalization and technological advances will continue to shrink traditional manufacturing and drag on badly needed wage growth, which thus far have remained stubbornly resistant to even full employment.
“The fact that we had growth in the labor market with stagnant wage increases was a big plus for corporate America, [but] that was not good for the workers,” Cardillo said. “People were still making the same amount of money they were making eight years ago,” he said.
“What remains to be tackled is a recovery in household income, and those who are working part-time but who would like full-time work has yet to fully recover,” Hamrick said.
“If you look at some of these broad-brush metrics, they’re headlines and they don’t include the fine print of the people who have not enjoyed the fruits of the economic recovery,” he said.
“These are the challenges for the next administration.”