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Presidents’ Parties and Job Creation

UncleSamOne of our readers recently suggested that “One may find that Republicans tend to create private sector jobs and Democrats tend to create public sector jobs.”

This seems to be conventional wisdom. We did some quick analysis to check the veracity of this wisdom. As it turns out, the exact opposite tends to be true during the last 70 years:  Private sector jobs tended to increase at a faster clip under Democratic presidents, and public sector jobs increased at a faster rate under Republican presidents.

The table below looks at private versus public sector employment at the beginning and end of recent presidential runs (in thousands of jobs as of December of each year):

presidential graf

Even armed with such information, one must consider it with a grain, or two, or three, of salt. As my colleague, Polina Vlasenko, has noted, politics and the president’s party is only one of many factors influencing employment changes.

Even if someone believes policy changes enacted by one president has an impact on job growth, that effect is not likely to be immediate, she noted: “So, even if, say, it is true that Bush-I enacted something that spurred private job growth, the effect of that something is likely to take some time to materialize, and so the jobs that result from it might appear when Clinton is already in office.”

3 Comments Post a comment
  1. Gilbert W. Chapman #

    Luke ~

    Although I have more often than not found your perspectives visionary (for lack of a better word), this time I think Polina has ‘hit the nail on the head’.

    In other words, “There has been a multiple year lead time.” As you pointed out, the job growth policies created under Reagan and Bush I didn’t come into full force until the Clinton years.

    Likewise, the ‘Big Government Schemes’ (Medicare, The Great Society) espoused by JFK and LBJ probably didn’t fully surface until the Nixon years.

    And, there might well be another factor . . . Both Truman and Carter had excellent numbers for the private sector . . . Could that have resulted because WWII and the Vietnam War had ended, and the demand for consumer goods could be fulfilled . . . Think ‘rationing’ during WWII.

    And . . . Then . .. Maybe the reduction in the Public Service Sector during the Obama years all came about because of reduced employment levels in state and local governments, who were strapped for money because of the Great Recession ? ? ?

    And . . . Finally . . . Maybe the three of us are ‘all wet’, and there really are no correlations that resulted from any president’s actions . . . Perhaps a look at which party controlled Congress might offer a better ‘fit’ for your thesis ? ? ?

    As always . . . Thanks for listening . . .

    ~ Gil

    Like

    January 22, 2015
    • Luke Delorme, Research Fellow #

      Hi Gil,

      Thanks for the comments.

      I think we can agree that this is probably a case where correlation does not necessarily equal causation. Nonetheless, I found the data interesting and perhaps a little surprising given the standard party rhetoric.

      I’ll go back to my regularly scheduled financial research now…

      Thanks,
      Luke

      Like

      January 23, 2015
      • Gilbert W. Chapman #

        You’re right on both counts ~ (1) On correlation/causation, and (2) on standard party rhetoric, and I’m a Republican ! ! !

        Now . . . If you and I, as economists, can’t figure it all out, can we really expect some airheads like your Senator Elizabeth (D), and Senator Ted of Texas (R) to perform any objective research on the subject? 🙂

        Like

        January 23, 2015

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