The Politics of Unemployment: Political Parties and Job Creation

Having examined how the stock market performed under different political parties and Presidential administrations in “Time to Invest: Markets Outperformed during the Second Half of a President’s First Term” and “Think You Can Make Money Investing When Your Party is in Power? Guess Again”, I decided to turn my attention to unemployment. More specifically, what does the rate of unemployment look like under the stewardship of different political parties? In addition to how it looks, I was also curious how it changed under different political parties and Presidential administrations. Not surprisingly, the findings are similar to the results of my study on stock market performance.

Unemployment Was Lower Under Divided Government…

This result differs from stock market performance during periods when one party controls both branches of government. During these periods, the stock market outperformed, yet the unemployment rate was higher than average for the 40-, 20-, and 10-year periods I observed. It is important to note that the 60-year average bucked this employment trend with unemployment being lower than the average when one party controls both branches of government. However, I think it is safe to conclude that in recent history, the trend shows that divided government tends to preside over periods when there is lower unemployment on average.

Average Unemployment: Party Control of Executive and Legislative Branches
Total Divided United
60-year average 5.8% 6.1% 5.4%
40-year average 6.4% 6.3% 6.5%
20-year average 6.0% 5.6% 6.5%
10-year average 6.4% 6.0% 6.7%
Source: Adapted from U.S. Bureau of Labor Statistics, U.S. House of Representatives, Whitehouse.gov

…But the Unemployment Rate Trended Negatively

More importantly, while unemployment appears to be lower during periods of divided government, divided government is bad for job creation. During periods of divided government, the unemployment rate increased on average for all the periods I observed, with the biggest increase registering an average of 1.3 percentage points in the first decade of the twenty-first century. This finding is consistent with my earlier finding that the stock market underperforms during periods of divided government.

Average Change in Unemployment: Party Control of Executive and Legislative Branches
Total Divided United
60-year average 0.1% 0.3% -0.2%
40-year average 0.1% 0.2% -0.1%
20-year average 0.2% 0.4% -0.1%
10-year average 0.6% 1.3% 0.1%
Source: Adapted from U.S. Bureau of Labor Statistics, U.S. House of Representatives, Whitehouse.gov

Both Republican Presidents and President Obama Presided Over Job Losses

There is no clear trend for average unemployment rates under either Republican or Democratic Presidents. Over the past 60- and 40-year periods, average unemployment was lower during Democratic administrations, but in recent history it was much lower under Republican ones.

Average Unemployment: U.S. President
Total Democrat Republican
60-year average 5.8% 5.3% 6.1%
40-year average 6.4% 6.1% 6.5%
20-year average 6.0% 6.0% 5.9%
10-year average 6.4% 9.9% 5.6%
Source: Adapted from U.S. Bureau of Labor Statistics, U.S. House of Representatives, Whitehouse.gov

However, one trend is clear. Across all four periods I observed, on average, unemployment rates increased under Republican Presidents. I may be a Republican, but I’m a rational one. So I won’t hide the numbers. They are what they are. The only period that Democratic Presidents performed worse than Republican Presidents was during the last ten year-period, which included President Obama’s first two years in office. I am not surprised.

Average Change in Unemployment: U.S. President
Total Democrat Republican
60-year average 0.1% -0.3% 0.3%
40-year average 0.1% -0.1% 0.2%
20-year average 0.2% -0.1% 0.5%
10-year average 0.6% 1.2% 0.4%
Source: Adapted from U.S. Bureau of Labor Statistics, U.S. House of Representatives, Whitehouse.gov

Republican Congresses Presided Over Periods of Lower Unemployment

Average unemployment was consistently lower for both Republican Houses and Senates for nearly every period I studied. The only exception was the average unemployment rate for the 60-year period for Republican Senates, which was only one-tenth of a percentage point higher than the average.

U.S. Congress
U.S. House U.S. Senate
Total Democrat Republican Democrat Republican
60-year average 5.8% 6.1% 5.0% 5.8% 5.9%
40-year average 6.4% 7.0% 5.0% 6.6% 6.1%
20-year average 6.0% 7.4% 5.0% 7.1% 4.8%
10-year average 6.4% 8.1% 5.4% 7.3% 5.1%
Source: Adapted from U.S. Bureau of Labor Statistics, U.S. House of Representatives

Democratic Congresses Bad for Job Market; Republican Senates Good

Like Republican Presidents and President Obama, Democratic Congresses are associated with increases in unemployment. The trend was persistent throughout all four periods of observation and particularly bad in the last decade. In contrast, Republican Senates tend to be associated with decreases in the unemployment rate.

U.S. Congress
U.S. House U.S. Senate
Total Democrat Republican Democrat Republican
60-year average 0.1% 0.1% 0.1% 0.2% -0.1%
40-year average 0.1% 0.2% -0.1% 0.3% -0.2%
20-year average 0.2% 0.6% -0.1% 0.7% -0.3%
10-year average 0.6% 1.4% 0.1% 1.3% -0.4%
Source: Adapted from U.S. Bureau of Labor Statistics, U.S. House of Representatives

At this point I won’t speculate on why the numbers fall out the way they do. Are politicians responsible for unemployment? Of course they are. But there are also many other factors that impact unemployment that are beyond a government’s control.

The purpose of this blog is to arm people with the facts. Readers can generate their own conclusions about what the data shows, but at least they will have the facts.

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About Sean Patrick Hazlett

Conservative clean energy crusader, national security hawk, financial analyst, engineer, and former military officer.
This entry was posted in Finance and Economics, Investing, Politics and tagged , , , , , . Bookmark the permalink.

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