There Are A Lot More Jobs. But That Isn't Helping Democrats For One Key Reason.

People aren't making more money.
President Barack Obama has presided over 65 consecutive months of net job growth, but wage growth remains slow.
President Barack Obama has presided over 65 consecutive months of net job growth, but wage growth remains slow.
Mark Wilson/Getty Images

When the economy created 242,000 jobs in February, it marked 65 consecutive months of net job growth -- the longest such streak in modern history.

That, in itself, is undoubtedly good news. The growth has brought the official unemployment rate down to 4.9 percent -- low by historical standards. And labor force participation, which counts the number of people working or actively seeking work, is finally ticking upward. That indicates that people who may have given up on finding a job are starting to return to the workforce.

The big question, however, is: Why isn’t the public more upbeat about the economy?

Despite the sustained job growth, nearly 64 percent of Americans think the country is on the wrong track, according to HuffPost Pollster’s polling average.

And this year’s presidential election has seen a surge of populist outsiders, the likes of which is unprecedented in recent U.S. history.

Donald Trump is triumphing over his Republican rivals with a promise to “make America great again.” In addition to the racial and cultural connotations of Trump’s resentment-themed campaign, he is channeling Americans’ frustration over the economy and promising solutions that violate conservative orthodoxy on trade and other matters.

On the Democratic side, Sen. Bernie Sanders (I-Vt.) has been able to mount a serious challenge to Democratic front-runner Hillary Clinton. He has achieved success by implicitly running against President Barack Obama's jobs record, which he says has not been adequate to meaningfully boost the fortunes of ordinary Americans.

The political landscape is especially confounding because a strong job market is usually a boon to the party of the incumbent president -- and by extension, the candidate that is most closely associated with him.

But Hillary Clinton, who has wrapped herself in Obama’s mantle, has seen her favorability ratings go down in recent months. Polls suggest she would currently beat Trump by a solid margin in a general election matchup, but the projected outcomes are far less rosy if one of the other Republican candidates wins the nomination.

One reason that the economy is not yet giving Clinton, or the Democratic party more broadly, the kind of political advantage that might be expected, however, is that wages have yet to grow substantially.

In fact, in February, average hourly pay declined 0.1 percent from the previous month. That brings total average wage growth in the past 12 months to 2.2 percent, not enough, economists say, to create a difference people can feel in their lives -- particularly after the effects of inflation.

The hours available to the workers who do have jobs also declined in February, by 0.2 hours.

That may be because the jobs the economy created in last month are concentrated in precarious, low-paying sectors like retail, hospitality and social assistance.

“All of this culminates in a very bad story, a very weak economy,” said Dan Alpert, managing partner of the investment bank Westwood Capital, and author of The Age of Oversupply: Overcoming the Greatest Challenge to the Global Economy. “This is going on in a presidential election year and you have Democrats saying, ‘We’re making jobs.’ And Republicans can say, ‘You’re making jobs, but you’re making crap jobs and wages aren’t rising.’”

“This is going on in a presidential election year and you have Democrats saying, ‘We’re making jobs.’ And Republicans can say, ‘You’re making jobs, but you’re making crap jobs and wages aren’t rising.’”

- Daniel Alpert, Westwood Capital

Josh Bivens, research and policy director of the progressive Economic Policy Institute, is less pessimistic than Alpert about the economy's trajectory. But he argues that people are especially disappointed with the sluggish wage growth, because their expectations have risen after years of consistent job growth.

“People are going to be unhappy about the economy until it starts delivering reliable wage increases,” Bivens said. “In 2011 and 2012, we had jobs again, and wages were not up, but people were willing to be patient. Now, seven years into the official recovery, people are justifiably less patient.”

Wages generally rise when there is so much demand for workers’ labor that employers must compete to hire them.

The fact that they have not gone up, according to both Alpert and Bivens, is a sign that there is still slack in the labor market -- or room for the economy to create even more jobs before it risks overheating and pushing inflation too high.

The reason for the slack, Alpert argues, is the persistent deficit in demand for U.S. goods and services left over from the financial crisis of 2008, together with vast global oversupply that has grown independent of the crisis.

The relative strength of the dollar has compounded the problem by making U.S. exports less competitive abroad. That’s part of the reason why the higher-paying manufacturing sector lost 16,000 jobs in February.

The solution, then, for economists who blame a demand deficit for lackluster wage growth, is fiscal stimulus: using government spending -- or alternately, targeted tax cuts -- to boost consumer demand.

It’s what Bivens calls the “same old stuff” Obama used in the immediate aftermath of the financial crisis, only now the economy needs “a lot less of it.”

Alpert notes that interest rates on U.S. debt remain at historic lows making it an opportune time for financing infrastructure spending, which would employ people immediately and benefit the economy in the long term as well.

Of course, while fiscal stimulus may be the “same old” technique for jump-starting growth, it is likely to encounter the same old political resistance from Republicans and fiscally conservative Democrats. “Stimulus” itself became a dirty word during the Obama years thanks to relentless Republican opposition.

For Keynesian economists, the insufficient size of the original 2009 Obama stimulus package created a Catch-22: on the one hand the sticker price of the bill was enough to shock the public, and on the other it was too little to fill the post-financial crisis gap in demand. As a result, the theory itself lost credibility.

“It is all for the good, but for the ideological block in the road,” Alpert said of his proposed expansion of infrastructure spending. “We did it in the 1930s. It worked fine.”

The Federal Reserve has a part to play as well -- by doing no harm. When the Fed raises its benchmark interest rate, as it did in December, it effectively puts the brakes on economic growth to head off inflation.

In light of the sluggish wage growth numbers, Alpert and Bivens expressed hopes that the Fed would hold off on another rate increase when its decision-making body convenes again on March 15-16.

“I don’t see them continuing on the way they said they will,” Alpert concluded. “They made an error in December.”

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