Unemployment in the Biden & Trump Economies

Both the current President and his predecessor claim credit for low unemployment. To what extent are recent lows in unemployment rates due to the policies of these two Presidents’ policies?

There are several causes of low unemployment. First, reducing minimum wage rates lowers unemployment, mostly for teens. Higher minimum wage rates correlate with higher unemployment rates (see the next graph). The real purchasing power of the current $7.25 minimum wage is nearly at an all-time low (see the second graph below). Inflation has devalued the real minimum wage, especially in the past few years. Also, Congress hasn’t raised the money rate of the Federal minimum wage in many years. Unemployment rates have risen since April 2023, but so have some state minimum wage rates. We should also note that Biden and his supporters want to impose a “living wage” of $15 or more. The second graph below indicates that this living wage would be job-killer.

The low point for unemployment in April 2023 (teen- 9.3%, overall- 3.4%) is well below the long run line of best fit. What else could have pushed unemployment rates so low? There have been other times when unemployment rates have fallen to such low levels- World War One, World War Two, the Korean War, and the War in Vietnam. Why do unemployment rates fall to under 4% during wars? Wartime mobilizations deprive domestic industry of labor. Wartime labor shortages tighten labor markets and this lowers unemployment rates.

Why did unemployment rate fall below 4% during Trump’s presidency? There was no wartime mobilization during Trump’s presidency, but labor supply tightened for other reasons. Baby Boomer retirement and strict immigration policies limited labor supply during the Trump Administration, prior to COVID. Pandemic unemployment benefits caused many workers to delay returning to work. COVID also caused deaths among working age Americans.

President Biden’s Open border policies did allow millions of foreigners to join the US domestic labor force. However, labor force participation fell during the COVID crisis, and recovered slowly during the Biden years.

There are other policies that may affect unemployment. However, tight labor supply appears to be a major cause of low unemployment rates for both the Trump and Biden Presidencies. Some factors that determine labor supply are beyond the control of any president. However, there are some things that they may do to open opportunities for workers. Repealing Federal and State minimum wages could lower unemployment in the future.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

 


Originally Posted at https://mises.org/


  • Related Posts

    Dave Smith: Will Trump Be Able To End The War In Ukraine?

    Dave Smith: Will Trump Be Able To End The War In Ukraine?

    At a recent pre-election speaking and podcast event, comedian and Libertarian political commentator Dave Smith expressed his view that it is very realistic that the next President Donald Trump could successfully negotiate an end to the Ukraine war

    Smith’s view is optimistic, as he articulated that he believes Trump’s expressed desire to end wars in Ukraine and Gaza is genuine. But Smith also laid out that much depends on who Trump puts around him in top national security positions. Below is the hard-hitting segment featuring the prominent commentator addressing the question: will Trump be able to end the war in Ukraine?

    Below are Dave Smith’s words from the segment on Trump and Ukraine below [emphasis ZH]…

    “Why the hell are we even expanding our military alliance to Ukraine? And listen, Donald Trump always says that the war ‘never would have happened if I was president, and I would negotiate an end to this.’

    And I gotta say I think he’s right about that. I don’t think the war would have happened if he was president – I think he will negotiate an end to it.

    I don’t think he’s right that Hamas wouldn’t have attacked Israel if he was president – that seems kind of ridiculous to me. But he’s right: the Ukraine war could be over tomorrow if American wanted to negotiated a peace to it.

    Vladimir Putin has been trying to the entire time… 

    Well the question becomes who does Donald Trump put around him? If Donald Trump puts Mike Pompeo, aka Liz Cheney’s pick for Defense Secretary… if he puts John Bolton, aka Hillary Clinton’s pick for national security adviser – then maybe not, maybe it doesn’t happen.

    But if he listens to Tucker Carlson, and ‘Bobby’ Kennedy, and Vivek Ramaswamy, and all the smart people around him – then yes, he could negotiate an end to that war.”

    Image source: Reason

    * * *

    Indeed, the question ultimately becomes: will Trump really keep the ‘swamp’ out of his administration this time around? We hope so.

    Tyler Durden
    Wed, 11/06/2024 – 18:00

    Hurricane Rafael Public Advisory

    …CENTER OF RAFAEL ON THE NORTH COAST OF WESTERN CUBA… …6 PM EST POSITION UPDATE…
    As of 6:00 PM EST Wed Nov 6
    the center of Rafael was located near 23.0, -83.0
    with movement NW at 14 mph.
    The minimum central pressure was 962 mb
    with maximum sustained winds of about 105 mph.

    You Missed

    Dave Smith: Will Trump Be Able To End The War In Ukraine?

    Dave Smith: Will Trump Be Able To End The War In Ukraine?

    Hurricane Rafael Public Advisory

    • By NHC
    • November 6, 2024
    • 2 views

    Netanyahu Fires Defense Minister Gallant; Set to Fire Military Chiefs

    Netanyahu Fires Defense Minister Gallant; Set to Fire Military Chiefs

    Iranian currency falls to historic low after Donald Trump named next president of the United States

    Iranian currency falls to historic low after Donald Trump named next president of the United States

    The View Goes FULL Meltdown: Disney’s TDS Election Response Is UNHINGED – But Joy Behar Subdued!

    • By WDWPro
    • November 6, 2024
    • 2 views
    The View Goes FULL Meltdown: Disney’s TDS Election Response Is UNHINGED – But Joy Behar Subdued!

    Tropical Depression Fourteen-E Public Advisory

    • By NHC
    • November 6, 2024
    • 2 views