"History tells us that job growth always lags behind economic growth."
Barack Obama on Friday, November 6th, 2009 in remarks from the White House
Obama says job growth always lags behind economic growth
Some Republican critics have scoffed at President Barack Obama's pronouncements that the economy seems to be improving, pointing to the unemployment rate, which keeps going up.
But Obama has consistently tempered his hopeful words about positive economic indicators with warnings that unemployment rates are likely to continue to rise for a while, even as the economy improves.
"History tells us that job growth always lags behind economic growth," Obama said Nov. 6, 2009, in remarks in the White House Rose Garden.
"He's right about that," said William Beach, director of the conservative Heritage Foundation's center for data analysis.
In the post-World War II era, there have been 10 recessions and after most of them, employment lagged a few months behind other improving economic indicators. But after the last two, in 1991 and 2001, unemployment rates continued to climb for more than a year.
Interestingly, Democrats criticized President George W. Bush regarding the 2001 "jobless recovery," much as some Republicans now criticize Obama for the current one.
The latest jobless recovery came as little surprise to economists who study such trends.
"Employers are hesitant to hire people back to the work force (after a recession) because they don't know if the economy is going to continue to grow, which is understandable," Beach said.
But more importantly, he said, the American economy has become increasingly reliant on service jobs, such as information and financial jobs. "Those jobs come back very slowly," Beach said.
The recession this time is even more severe, so Beach predicts this jobless recovery will last even longer than past recessions.
"I don't think we'll see jobs coming back for a long time," Beach said.
But even without government meddling, Beach believes employment was destined to lag.
The San Francisco Chronicle , relying on numbers from the Bureau of Labor Statistics, in August charted the lag between recessions' end and the peak of unemployment rates. In the eight recessions between 1949 and 1991, unemployment rates lagged by an average of about three months. After the last two, however, it took 15 months and 19 months, respectively, before unemployment rates peaked.
Bottom line, President Obama is right when he cautions that employment has lagged behind economic recovery in the past. And so we rate his statement True.
Published: Monday, November 9th, 2009 at 6:32 p.m.
Bureau of Economic Analysis, Gross Domestic Product, Percent change from preceding period , Oct. 29, 2009
Bureau of Labor Statistics, Historical Table: Labor Force Statistics from the Current Population Survey, Unemployment Rate
San Francisco Chronicle, "We could be facing another jobless recovery," by Kathleen Pender, Aug. 6, 2009
Economic Cycle Research Institute, International Cycle Dates, The Growth Rate Cycles Chronologies , Nov. 6, 2009
Interview with William Beach, director of the Heritage Foundation's center for data analysis, Nov. 9, 2009
Interview with Lakshman Achuthan of the Economic Cycle Research Institute, Nov. 9, 2009
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