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.


Tawny said...

I just happened to come across this post and I absolutely love it! It goes along with other charts I've found showing how the national debt increases when a Republican Pres. is in office versus tapering off when a Democrat is in office. And yet we continue to give Republican's a try when statistics show it's not best for our economy. WHY?

Anonymous said...

Thank you for doing this. It exactly answers my question.

Jeremy said...

Nice work Andrew.

Thought I'd check out the link because I haven't been on in awhile.

Took it to another level on this one.

Rachel said...

I would suggest adding in years along the x-axis to help distinguish the exact dates of each peak more easily. Also, add in specific events (such as wars) because at the beginning of the graph you attribute the decrease of unemployment during Truman's presidency to his policies, yet it was WWII that created jobs with the need for airplanes and machinery.

Also, with your explanations of economic theories, I would suggest adding in if there were any tax cuts or increases during the president’s term. Republicans usually favor tax cuts to companies (and therefore are pro-business) because in Supply-Side economics, the taxes are passed on to the consumer, so if taxes are raised, the price for the product is higher for the consumer. The opposite is true if taxes are cut.

Tawny: Which graphs are those? I would like to look at them, also.

Andrew said...

Rachel, you are correct that Republicans tend to favor tax cuts for businesses, however I would not say that the taxes then get passed on to the consumer. In fact it really doesn't seem to favor the consumer at all. Tax cuts need to be for the middle class, ie the consumers, and not for businesses. Businesses tend to pocket the money and distribute it to very few select people at the top, where as the consumers tend to spend any extra money that they get from tax cuts. Trickle Down economics was a bust, it does not work.

The opposing theory, New Keynesian Economics, modulates the interest rate as well as giving tax cuts and raises based on economic conditions. This dynamic system, which tends to be supported by the democrats, lends itself to a more stable job force and, as you can see by the graph I put up, it seems to even typically generate more jobs.

I agree I should add wars and major world events to the graph, and if anyone would like to look up all potential events that could create or destroy jobs that I can then use in the graph please do so and list it here. I don't have a lot of time these days to do that, but it is an excellent idea.

Grimp said...

I was intrigued by your graph. Have you considered government growth and additional government hiring as a possible cause of unemployment decline during democratic years?

And now for a shameless plug:

瑪利亞 said...

Never put both feet in your mouth at the same time, because then you will not have a leg to stand on.............................................

Aaron Vargas said...

This makes perfect sense, because history has shown us that you only see the true affect of a presidential administration several years after they serve in office. Bill Clinton allowed for China to become a bigger player in trade. George W. Bush spent much more than earlier fiscal conservatives in the War as well as through tax refunds. Barrack Obama continues to spend with our two wars, universal healthcare, bailouts, and failed stimulus programs. We need a tough fiscal conservative like Regan to get back on track.

Aaron Vargas said...

Also, my earlier statement only looks at the affect that a presidential administration has on an economy. Any economist will tell you that many other variables shape the economy including trade, GDP, resources, natural disasters, cultural values, diplomacy, etc. This isn't to say that the presidential administration does not play an important role - it obviously does - but there are more factors that determine our success as an economy. We can't continue to hope in our political leaders (and business leaders) to pull magic tricks to fix failed cultural norms and global market realities - we need leadership that not only provides excellent solutions but also inspires the American people.

Anonymous said...

Who is this Regan that's referred to three times on this page. I vaguely remember a president named Reagan ...

scubajoe17 said...

"however I would not say that the taxes then get passed on to the consumer." WHAT?!?!? why does gas prices rise when taxes go up then? I sell online...when someone from my state buys something...the sales tax gets tact on to the final price. I(the evil corp.) dont pay the extra customers do!!!

triniprince6 said...

I would just like to say that I come from the right and I find this article very informative but I must say there are other factors involved, which is why i post this link

Anonymous said...

Nice try but look at the stats when Democrats control congress versus when Republicans did. Anyone who knows politics knows who passes the laws. I.E. see the Clinton years.... I think you will find the opposite in trends.

Anonymous said...

your full of Crap Democrats want to cut taxes. Yea right which party is always wanting new taxes it the Democrats. Look at the name of the party Dem o cRats although spelled different your Dim and your Rats not bright and you take away from Hard working people to give to those who will not try to prosper and earn money. Your like stilling Rats.

Anonymous said...

Learn how to read a graph before u comment on it thats not whats happing hear at all. Ur just seeing wat u want to see look what happens after the name not at.

Anonymous said...

Might I suggest that you also add into the mix the number of people on Welfare, food stamps and disability? You'll find out that Republicans got more people OFF of those things and Democrats got more ON them. You can't take just unemployment by itself without those factors too.