Economists say the number is less meaningful than it seems
President Trump touted the fact that 1,074,000 jobs have been added to the economy since he took office on social media Wednesday.
While that number is accurate according to numbers from the Bureau of Labor Statistics, experts warn that it may not be the best measure for taking the temperature on the economy, and certainly not an accurate reflection of Presidential efforts.
Employment has been steadily increasing since at least 2013, says Jennifer Hunt, former Chief Economist of the U.S. Department of Labor, and any president—not just Trump—is likely not to have as big of an impact on job creation statistics as they might claim.
“There’s nothing actually special or surprising” about the number, says Hunt. There’s a few reasons for that. The job addition or employment rate tends to increase proportional to population growth, so the job addition rate tends to increase steadily without having much or any effect on unemployment.
And, the fact that that many jobs have been added since Trump took office is about par for the course with the last few years of steady economic growth. For comparison, Bureau of Labor Statistics numbers show that about 1,246,000 jobs were created during the same months (February to July) under President Obama last year. The last real drop in the job creation rate was under the recession.
Like the stock market and other areas of the economy, job addition typically happens on a more glacial time scale than Trump claims.
“Even if Trump had done something, it probably wouldn’t be showing up in the numbers yet,” Hunt said. Because of this lag, any changes we might see now are either part of the normal growth rate or the result of actions taken during Obama’s tenure.
Teresa Ghilarducci, a labor economist at the New School for Social Research, agreed that it would be impossible for a president to influence job creation after just six months. But in time, Presidential policies and changes to the federal budget could influence the confidence of the market enough to have significant impact on jobs.
Ghilarducci added that the job creation number itself only tells part of the story when it comes to employment. While “the headline numbers tell a good story,” said Ghilarducci, it’s also critical to look at other factors like the quality and stability of jobs on the market. Factors like wages and mismatch between the education level required by a position and the education level of the person holding it are critical indicators that aren’t addressed by the simple number of added jobs.
It’s also important to keep in mind how the job creation rate and unemployment differ, added Hunt.
Unlike the unemployment rate, which is calculated by survey, job creation statistics come from the reporting of individual firms. Both surveys have a small margin of error, but the job creation tally is likely to be slightly more accurate. And it can be a useful indicator for firms, which are generally more interested in the overall size of the economy than the unemployment rate.
But the unemployment rate is generally considered to be a more nuanced and informative indicator of the economy’s health, because unlike job creation, it operates around a clearer baseline—within reasonable limits, unemployment should always go down. And unemployment data can be further broken down to indicate the percentage of Americans who are seeking jobs, unemployed but not seeking jobs, or would seek jobs if they felt they had better prospects. Right now, the country is in the midst of its second year of sub-5% unemployment, the lowest it’s been consistently since 2007.
Before he was elected, the President was often distrustful of economic indicators. Last August, he called the unemployment rate—then at 4.9%— “one of the biggest hoaxes in modern politics.”