The July jobs report released on Friday, August 8, gave mainstream media pundits plenty of reasons to cheer. According to the U.S. Department of Labor, the economy added more than a quarter of a million non-farm payrolls, greatly exceeding analysts’ estimates. Overall unemployment remained at a low 4.9 percent, which suggests a genuine recovery. That in turn will give the green light to a Federal Reserve that’s itching to adopt a hawkish monetary policy.
However, both the Fed and political powerbrokers will be ill-advised to make rash decisions based on this solitary report. Even if we were to include all other jobs reports that confirm a bullish trend in employment figures, we have to be careful. The devil is in the details, and we have not been given the full story.
An assumption that the labor market has recovered based on nominal jobs growth alone is akin to returning a defective TV, only to receive half of the refund. Would you consider that to be a fair deal? Or would you — like virtually everyone else — feel ripped off?
That’s essentially to what the circus surrounding the jobs report amounts. A million jobs, two million jobs — even ten million jobs — doesn’t mathematically and contextually tell us anything. It’s the wage growth that matters. And that statistic has been very poor. Since 1976, the average (inflation-adjusted) hourly wage for a production worker has only moved up by 10 percent. That’s an annual raise of only 0.25 percent — hardly the basis for economic confidence.
Facts Speak For Themselves
Admittedly, the shocking lack of progress speaks to unnecessary Washington gridlock. All sides of the political spectrum are guilty of producing party members that put individual interests ahead of domestic concerns. But another set of facts speak for themselves. Publicized instances of politicking doesn’t take away from the reality that some economic principles are superior to others.
When considering the last 40 years — roughly the age span of Millennials and younger Gen-Xers — there are unmistakable, mathematical facts that keep recurring. Namely, Republican presidential administrations are simply better for hard-working American families.
Wage growth for production workers under a Republican White House averages 4.3 percent. Democrats, on the other hand, can only muster 0.23 percent. The differential between the two is astounding — nearly 1,800 percent! But what accounts for these differences?
Fancy Rhetoric Only Goes So Far
Many economists will point to President Obama pulling the country out of the Great Recession as the primary reason why Democrats are better for Main Street. But the economic recovery story is a point of contention. Even if we were to grant that things are A-OK, the reality is that paychecks have not risen enough to overcome the total — and ongoing — damage of the 2008 global financial crisis.
Aside from Obama, the Clinton years — much touted as they are — have produced negligible gains for workers. From the beginning of his presidency to the end, average workers’ wages had only grown 0.62 percent, or an annualized raise of less than one-thousandth of a percent. The Carter years were even more abysmal, with workers’ wages declining more than 5% in an era of runaway inflation.
Combined, the numbers tell a story of contrast. Fancy rhetoric only goes so far. Socialist and welfare programs don’t produce equality; they aggressively harbor inequality! One can point to President Johnson’s Great Society experiment — where workers’ wages grew roughly 8 percent — as an example of socialism’s success. But Republican Presidents Eisenhower and Nixon grew workers’ wages by an average of 18.5 percent, a far superior result.
It may be hard to decide for which candidate to place your ballot. But the best advice is this — view the election not as a political process but as an investment. Given the long-term, historical track record of one party’s economic policies over the other, who would you trust with your wallet?