Editors' pick: Originally published Oct. 20.
A major divide between presidential candidates Hillary Clinton and Donald Trump has been their outlook on the economy and its progress under President Barack Obama. During Wednesday night's debate, Trump elaborated on that argument saying, in relevant part:
So I just left some high representatives of India. They're growing at 8%. China is growing at 7%. And that for them is a catastrophically low number.
We are growing - our last report came out - and it's right around the 1% level. And I think it's going down. Last week, as you know, the end of last week they came out with an anemic jobs report. A terrible jobs report. In fact, I said, is that the last jobs report before the election? Because if it is, I should win easily, it was so bad. The report was so bad.
Donald Trump, speaking at the third presidential debate on Wednesday night. Per Fortune's transcript.
Now, it's first important to point out the limited power a president has over the economy. Domestic markets, global markets and Congress (which Republicans control) all have enormous influence over economic output. However a president's policies still do have substantial impact, both as enacted and as a means of setting the tone in Washington.
With Clinton running on many of the same basic theories by which Obama has governed, Trump's is a fair line of attack. But is it accurate?
Let's dive into the numbers.
The decline of economic growth in America has concerned economists for well over a decade. As we've covered before, many economists cite slowing growth as a major factor in wage stagnation as well as the continued slowdown in hiring.
The result has been a quadrennial call for improved GDP growth, with candidates routinely vowing to boost America's bottom line during their presidency. During the 2016 cycle, Republican candidates (including Trump) promised a 4% rate of annual economic growth if elected to office, and during the debate Trump drew unfavorable comparisons to the numbers posted by nations such as India and China.
This assessment is middling at best.
To begin with, comparisons to developing nations are disingenuous for many reasons. Yes, countries like China can rapidly grow their GDPs (although India's has been far more variable than Trump suggests), but that's primarily a factor of how far behind they were to begin with. When a nation has vast numbers of people who live below the global poverty line as, China did before its expansion, there's much more room to grow.
This is not to discount the accomplishment of lifting, by the World Bank's estimate, nearly 750 million people out of poverty, but it is nevertheless easier to make a poor population wealthier than a middle class one. There's less room to grow.
Yet here in America, growth has remained sluggish. For the first half of 2016 it hovered just above 1%. That is not necessarily representative, though, as this chart shows. Since the end of the Great Recession, growth has averaged between 1.5% and 2.5% per year, sometimes spiking as high as 5% in a quarter while other times falling as low as -1%.
Economists also hesitate to blame the White House fully. In addition to the aftershocks of the Great Recession, many argue that U.S. growth has slowed for reasons that have nothing to do with economic policy. Recent technological advances haven't improved productivity as much as in the past, and new workers aren't entering the labor force in as large numbers. Without a way to expand either the pool of workers or their productivity per hour worked output will stagnate.
Finally, 4% is an ambitious target… and one which must be put in context. The U.S. has sustained four years of economic growth higher than 4% (the duration of a presidency) only three times in modern history: 1962 to 1966, 1950 to 1953 and during Bill Clinton's term between 1997 and 2000.
Trump's citation of weak GDP growth is fair. The post-Recession economy has often struggled to produce real gains, and the result may well have depressed hiring and wages. Whatever the reasons, Obama's policies have failed to stabilize that.
Trump's criticism of it is not. Comparing a developed, industrial economy with the trajectory of nations like China and India ignores how different these environments truly are. Citing 1% growth is misleading without context of the rest of Obama's post-Recession presidency, and any discussion of the issue deserves a meaningful exploration of exactly what a President can actually do to spur the GDP.
The economy added 156,000 jobs in September. The same jobs report also revised up the number of jobs created in August to 167,000 and in July to 252,000. The unemployment rate ticked up from 4.9 to 5.0%, however from the data, it appears that this was largely as a result of modest gains in labor force participation.
Historically this is a modest but respectable gain. For example, since 2000 the economy has averaged a gain of approximately 105,000 jobs during the month of September. (This calculation does not include 2008 and 2009, as outliers.) The last time the economy regularly produced more fall jobs was during the boom years of the 1990s.
Similarly, the unemployment rate is pretty healthy.
The Federal Reserve considers "full employment" to fall somewhere right around 5.0%, depending on macroeconomic conditions. Currently, its target is closer to 4.8%. This means that September's unemployment numbers are slightly high, but closer to running a fever of 98.8 than 104.
Given the growth in jobs, the slight bump to unemployment likely comes from an equally small boost to the labor force participation rate. Despite a six-year free-fall starting in 2008 labor force participation has held relatively steady for the past two years. Although there is no current sign that it will return to its pre-Recession levels, it has trended slightly upward lately. (Data for labor force participation rates and employment were procedurally generated by the BLS, available here.)
This is anything but a "terrible" jobs report. While not a remarkably strong month, September was a perfectly respectable one with job creation above the 21st Century average and unemployment that remains near the Federal Reserve's objective.
Far from a Trump talking point, this is the kind of stable, steady growth that Obama can brag about.
In September, wages grew at a rate of 2.6% from a year prior, up from 2.4% in August.
This is enough to keep wages growing faster than inflation; however, meaningful improvement still remains tentative. It has only been within the past 18 months that wage growth has consistently averaged above 2.0%, and many economists and workers' advocates argue that even the recent numbers are too low to improve standards of living.
The left-leaning Economic Policy Institute, for example, has set a target of 3.5% to 4%, one which current numbers fall far short of.
Although there's more to criticize on wages than with the jobs numbers, Trump's characterization of "terrible" remains inaccurate. Wage growth has begun to accelerate, with a steady upward trend since January, 2015, and 2.6 percent in September is enough for workers to receive a meaningful pay bump.
That said, there's still good reason for workers to argue that they have not shared in the post-Recession recovery, and growth of 2.6% is moderate at best. It is legitimate to argue that a president should do better, even if "terrible" is too strong a word.