A Tale of Two Economies

When Barack Obama took the presidential oath of office in 2009, the economy was 14 months into a historic meltdown. The U.S. was losing more than 700,000 jobs a month, the Dow Jones Industrial Average was 42 percent below its 2007 high and one in 45 households would file for foreclosure during the year.

The recession Obama inherited from George W. Bush officially ended midway through Obama’s first year in the Oval Office. But the rest of Obama’s presidency was largely defined by the ensuing economic recovery—one still underway as Trump takes office on Friday.

By many measures, the U.S. economy has shown marked improvement since Obama took office. Median household income increased 5.2 percent in 2015, according to a September Census Bureau report – the biggest year-over-year increase since it began tracking wages in 1967. Traders watch anxiously as the Dow flirts with 20,000 for the first time in history. Home foreclosures dropped to an 11-year low in September. And Obama leaves behind a jobless rate of 4.7 percent, lower than anything seen during the Ford, Carter, Reagan and G.H.W. Bush presidencies.

But in other ways, the recovery has chugged along slowly, and growth hasn’t been distributed evenly, offering mixed signals about how well Americans are actually doing.

The unemployment rate is down, for example, but so is the participation rate, a measure of the number of people either employed or actively seeking work. Falling labor participation has been a concern for nearly two decades, but the participation rate hasn’t been this low since the spring of 1978, and the employment-to-population ratio, while slowly improving, is well below prerecession levels.

During his farewell address last week, Obama touted the 11.3 million jobs created during his eight years in office. But that’s no solace for manufacturing workers. In total, 286,000 manufacturing jobs were lost under Obama, including 45,000 since 2016.

The unevenness of the economic recovery is especially stark when you consider how those 11 million new jobs were spread out across the country. A 2015 report from the City Observatory found that from 2007 to 2011, city centers saw positive job growth while employment in the surrounding suburbs shrank, reversing a trend prior to the recession. Separately, a Department of Agriculture report found that through mid-2016, metro employment had exceeded its prerecession peak by 4.8 percent. But, non-metro employment shrank 2.9 percent during the same period.

Even when a struggling industry began to recover, growth was often concentrated in limited areas. Take the information sector. Average earnings in information jobs, which include positions in data processing and software development, are among the highest of any job category, and they’re representative of the type of jobs Obama stressed as key to expanding a strong modern economy.

Information jobs tanked during the recession – the sector shrank by about 215,000 jobs from the first half of 2008 to the first half of 2016. And while job totals have increased 4.7 percent from the post-recession lows in mid-2011, most of the growth has been confined to a few major urban pockets.

California’s Santa Clara County, home to Silicon Valley, added more than 30,000 of these jobs since Obama took office. The counties that contain Los Angeles, San Francisco, Manhattan and Seattle gained a combined 100,000 information jobs. Almost everywhere else, information-sector jobs either shrank or remained largely stagnant.

It’s even more bleak for those employed in goods-producing roles, a sector of employment which includes roles in manufacturing, construction and mining industries. Overall, the sector lost 1.2 percent of its jobs since Obama took office, about 234,000 positions. But service-providing jobs, which include roles like business, finance, and health care, increased 10.1 percent since January 2009, a gain of 11.5 million jobs.

Unsurprisingly, many Americans said that they remained concerned about the state of the economy in 2016. Last summer, a Pew Research survey found that both Trump and Clinton supporters viewed the economy as the most important issue to them in the 2016 election – outranking terrorism, immigration and Supreme Court appointments. Even voters who leaned Democratic were wary; only 40 percent of respondents thought economic conditions in the U.S. were excellent or good.

Donald Trump’s rise to the White House confirms that the economic worries of voters had at least some effect on the outcome of the election. During the campaign he routinely promised to bring back jobs to such places as the upper Midwest, where voters felt the recovery had left them behind as traditional industries of the region eroded.

Much like Obama, Trump intends to target job growth. He told reporters at a January 11 press conference that he’ll be “the greatest jobs producer that God ever created.” And his one-on-one negotiating with such companies as Ford and Carrier shows he intends to be personally involved in the process.

Orchestrating four years of positive growth will be hard, as the economy can be both unpredictable as well as largely uncontrollable from the Oval Office. But Trump does have one advantage over his predecessor – Obama hands Trump a lower unemployment rate than all but two of the last nine presidencies started with. The question is whether Trump will maintain it.