Is President Trump outperforming his predecessor when it comes to job creation? He certainly thinks so. “JOBS, JOBS, JOBS!” he tweeted after the latest monthly numbers showed employers created 224,000 new jobs in June.
But job growth has actually slowed under Trump. This isn’t necessarily a problem. The economy has created jobs consistently since 2010, with the peak coming in 2014, when companies created 3 million jobs, or 251,000 per month. During the last 12 months, employers created 2.3 million jobs, or 192,000 per month. During the first six months of 2019, the pace has slowed further to 172,000 new jobs per month.
Here’s the trend in job creation since 2007, with the annual change in average hourly earnings along the x axis:
Partisans engage in mortal combat over who deserves more credit for the solid labor market — Trump, or President Obama before him. It’s a silly argument. What the numbers show is a recovery gradually gaining steam after the devastating recession that ran from 2007 to 2009. There’s no reason to think presidential policies (or character) have had much to do with the trendlines.
Trump inherited that recovery from Obama, benefiting from the trend in some ways. Income growth under Trump has been stronger than it was under Obama, peaking at 3.3% last year. The highest increase in earnings under Obama was 2.7% in 2016, the last year of his presidency.
Trump may think his policies, such as a deregulatory push or the 2017 tax cuts, are responsible for stronger income growth. But it’s more likely incomes are growing as labor market slack tightens up and workers become harder to find. That’s what normally happens as a recovery matures. Economists have actually been surprised it took as long as it did to get back to 3% earnings growth.
The slowdown in job growth is another normal development. Part of the reason is probably a shortage of workers with the skills some employers need, which typically happens late in a business-cycle expansion. Job growth could slow further and still be fine: Economists say 100,000 new jobs per month is enough to keep up with population growth and keep a recovery humming.
The risk for Trump isn’t in any comparison with Obama. It’s what those trendlines will look like during the next two years. We’re already in the longest economic expansion on record, thanks to the durability of the U.S. economy and, if anything, a dogged and generally effective Federal Reserve. Trump’s reelection odds depend on the recovery continuing, which it can even if job growth slows.
Trump could end up running against Obama in an indirect way, if former vice president Joe Biden becomes the Democratic nominee. Biden claims Obama (and his vice president) laid the groundwork for a strong economy today, which Trump is now squandering. If the economy is still running strong in November 2020, voters probably won’t buy it. But it might not be.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman