How low is unemployment now under Trump

From job miracle to record unemployment: The US labor market under Trump

"America first!" Donald Trump's political leitmotif contains a promise and an approach on how this is to be fulfilled: The US should remain number one in the world. To do this, of course, one's own interests must come first.

The US President explained the central element of his policy four years ago as follows: "Every political decision has to pass a simple test: will it create more jobs and better wages for Americans?" Trump wanted to create 25 million additional jobs. First of all: He failed because of that, even before the corona pandemic.

However, a snapshot of the labor market does not do justice to Trump's tenure. Unemployment actually fell in the United States by the time the pandemic broke out. Nevertheless, the current situation deserves a closer look. Because with the Corona crisis, the highest unemployment rate since the Great Depression of the interwar period also fell during Trump's term in office. In April, almost 15 percent of the working age population in the United States had no job (see chart).

Cash instead of short-time work

While many blame the president for not responding adequately to the health challenge, the same cannot be said of the stimulus measures the White House co-operated with Congress: $ 1,200 a lump sum to all citizens and $ 600 a week for the unemployed the two trillion dollar package.

Republicans and Democrats jointly mobilized over twelve percent of gross domestic product (GDP). That is a quarter more than in Germany, twice as much as in Canada and four times as much as France. Lots of countries that, from the point of view of many Americans, are celebrating state intervention in the economy.

The fact that unemployment soared in the USA is also due to the state approach: "In the USA there is no short-time work to the same extent as in European countries," says Philipp Hauber from the Kiel Institute for the World Economy (IfW). Instead of maintaining jobs, the US government made sure that those affected have an income even without work.

"Hire and fire" mentality

This is also due to the "hire and fire" mentality, which describes the US labor market quite well. It is easy for companies to get rid of employees. This is why unemployment soars in times of crisis. On the other hand, companies are also quicker to hire again when the economic weather conditions brighten. It is easier for Americans to change jobs and relocate for it than Austrians, for example. The recovery in the labor market should therefore be rapid.

Of course, not all Americans bear the burden of the crisis equally. While high earners have de facto put up with the crisis, those on lower and middle incomes continue to have high unemployment rates. Nevertheless, the poorer sections of the population in particular continued to consume thanks to the aid funds and thus stimulated the economy, according to evaluations by the US economist Raj Chetty. After the crash in the second quarter, the US economy grew significantly in the third quarter.

However, the wounds from the spring are far from healed and the upswing is likely to slow down, experts say. Just where a second wave of the pandemic is rolling across the world, politics hesitates. A second economic stimulus package is still in coming. The first stimulus expired in the middle of the year and was continued to a lesser extent.

During the struggle for the White House in particular, little was made of economic policy. "Provided that the election is done properly and delivers clear winners and majorities in Congress, a second economic stimulus package could soon be passed, which would accelerate employment growth," estimates Hauber.

Otherwise, unemployment is likely to remain high for longer. In September, 661,000 jobs were created instead of the expected 850,000. The number of employees is still more than ten million below the pre-crisis level.

Tariffs didn't create jobs

Until the pandemic, the labor market under Donald Trump did not perform badly. Despite sharp attacks on alleged job robbers like China, the US saw significant job growth. Around seven million jobs were created between the beginning of 2017 and the outbreak of the crisis. "Overall, the development of employment under Trump was decent. This is not only thanks to him, but fears that the US economy will crash soon after his election have not come true," says Hauber.

And the big hit in the steel or aluminum industry, where Trump wanted to create jobs in the USA with punitive tariffs against foreign competition, did not succeed either. "There has been no boom in the industries," said Hauber.

The fact that unemployment generally developed well under Trump's predecessor Barack Obama and later also under Trump up to Corona is not just due to newly created jobs. The statistics record the share of unemployed in the labor force, i.e. those who are also looking for a job. If you do not search at all, you are therefore not unemployed. The so-called participation has continuously decreased since 2008. That distorts the picture of the job miracle. (Leopold Stefan, Aloysius Widmann, November 2nd, 2020)