Monday, September 08, 2008

Unemployment: Democrat VS Republican Presidents

Last Friday the Bureau of Labor Statistics (BLS) released a statement claiming that the unemployment rate in the US had jumped from 5.7% to 6.1% in August (here). That means that there are roughly 7.6 million people unemployed in the US today. That is a large number of people looking for a job and will likely play a big roll in the next few weeks as Obama and McCain try to persuade people that their economic policy will be the most beneficial to the american people. So I decided to see what the trends of unemployment under Democratic or Republican presidents have been, and, not surprisingly, it appears that the democrats have outdone the republicans.

Below is a chart depicting the yearly data collected by the BLS since 1947 when the legal working age became 16. The date of each president's final term along with their party affiliation is labeled. On top of the raw data chart is a sloppy trend line graph that I added to show the increases or decreases of unemployment during the entire incumbency of the president. For the trend graph the lines that are blue represent a democratic president and the red lines represent the republican presidents. Click on the image to enlarge it.

It is fairly obvious to see that under nearly all of the democrat president's administrations unemployment has gone down, and vice versa for the republican's. I was, however, surprised that even one of the republican administrations, Ronald Regan's, was able to lower the unemployment rate and he was fairly successful at it. I was also surprised that the only democrat that showed an increase in unemployment was John F. Kennedy, though the increase was marginal and Lyndon Johnson continued J.F.K's policies and he did exceptionally well. The actual numbers for each year can be found here.

Furthermore, I averaged the rate of change in unemployment per year for each president and came up with these numbers:

PresidentAvg. % Rate Change Per Year
Truman (D)-0.15
Eisenhower (R)0.357
Kenedy (D)0.066
Johnson (D)-0.42
Nixon (R)0.333
Ford (R)0.933
Carter (D)-0.15
Regan (R)-0.2
Bush I (R)0.5
Clinton (D)-0.438
Bush II (R)0.263

Averaging all the democrat and republican presidents' percent change per year and we see exactly which party tends to create more jobs, ie the party with a negative change per year in unemployment.

Democrat Avg.Republican Avg.

The next question I asked myself is what policy did each of these presidents decide to follow? I quickly came to an answer by reading through Wikipedia (which I understand is probably not the best source of information but I am too lazy to go looking for any real documentation). The Republicans seem to rely on a model of economic policy called Supply-Side Economics which tends to benefit the producers, ies corporations and the rich, in an attempt to increase the amount of goods and services produced. The Democrats, on the other hand, tend to follow the model of economic policy termed New Keynesian Economics, which changes in response to economic downturns by investing in more infrastructure and cutting taxes to create more jobs and give more money to the less wealthy, which will hopefully create more demand for products and services.

While I have not analyzed which model of economic policy works best for the general economy of the US, I believe it is safe to say that under democrat presidents unemployment tends to decrease, and that is probably due to New Keynesian economic policies, and conversely under republican presidents the number of unemployed tends to increase (especially under George W. Bush's policies), which is most likely due to the failings of Supply-Side Economics in providing new jobs.

Of course, and as obligatory adjunct, there is a lot of variables I did not consider that are very likely heavily involved in creating jobs in the US that aren't even related to the presidency or an economic model. However, I think it is compelling data and shouldn't be taken too lightly when considering what president you plan to vote for in November, especially if you are going to be looking for a job anytime soon.