The U.S. Economy in 2016 - and a Retrospective to the Great Recession

By Bill Barclay and Peg Strobel

It was the best of times, it was the worst of times. This phrase from Charles Dickens' novel about the French Revolution, Tale of Two Cities, aptly describes the starkly different views of the U.S. economy in 2016 and progress (or not) in the years since the financial panic of 2008.

The best of times: by the end of 2016, official unemployment dropped from 5.0% to 4.7%, reaching what Federal Reserve Bank ("the Fed") Chair Janet Yellen called close to "full employment."  The worst of times: at his first press conference as president, Trump insisted that “there are 96 million [people] wanting a job and they can't get [one].”  Since 60% of Trump voters believed that unemployment went up during Obama's eight years in office, Trump's claim makes perfect fantasy sense.

We're in a political moment when too many people don’t see the difference between reality (facts) and falsity (alternative facts).

Where did Trump get his 96 million number? Well, there are 96 million people age 16 or older who are not working. Of course, a lot of those are retired. About 46 million people are over 65, and they are much less likely to be working than younger people. Others are in school, choosing to stay home, etc. Of the 96 million, there are 5.4 million who say they want a job, even if they are not actively looking for one. The reality? Unemployment, however measured, halved during Obama’s years in office.

So what's going on with job growth? For the past 6 years, job growth has been impressive. In fact since 2010, there have been 76 consecutive months of net job growth, a record for the United States. At the same time, however, during the years since the onset of the Great Recession, employment has grown by 6.1 million while the civilian population has increased by nearly three and one-half times that to almost 22 million. Thus the proportion of people in the labor force (labor force participation rate, LFPR) has declined. In 2016, for first time since the Great Recession, the growth in employment was larger than the growth of people “not in the labor force.” Good news, but median family income is no higher today than immediately prior to the 2008 financial panic. So despite job growth, working people (and those seeking work) understandably feel the economy is not working for them.

Perhaps more important in shaping the perceptions of middle-income voters (households in the 40th–80th income quintiles that were the core Trump voters) was the decline of their wealth and resulting concern that they lack an economic cushion to fall back on. While the highest-income households lost less than 10% of their wealth, these middle- to upper-middle income home owner households lost almost 40% of their wealth. 

Large wealth losses create anxiety and resentment. Who is to blame for this sudden change in today’s economic well-being as well as in the prospects for the future?  Anxiety is the fear that you will fall further in the wealth and income hierarchy. Resentment is directed against those who are perceived to suffer less or be treated favorably during the wealth-destroying economic collapse.

So who are the possible political targets of resentment?  One answer is obvious – at least to socialists and other progressives. The financial panic triggered class warfare, waged by the Bush administration with the support of Congress. When Treasury Secretary Hank Paulson drove the bail-out of the financial system in October 2008, he ignored the housing-based wealth of middle- and upper-middle income households. He did, however, insure that the big money-center banks had carte blanche at the Fed if they needed assistance. But if you believe that unemployment increased and, as two-thirds of Trump voters do, that immigration is “a very big problem,” that is where your resentment will focus. A “beautiful wall,” is the answer.

Unfortunately Trump voter economic fantasies do not stop with jobs. Another example; one-third of Americans did not know that the "Obamacare" they want destroyed is the "Affordable Care Act" they need. And, almost 40% of his voters believe that the stock market fell during the Obama years. It actually went up 150%, the third best performance of any president’s term since 1900. For Trump to match this performance, the Dow Jones [stock price] Average, currently at about 20,000, will have to go to 50,000.

Economic fantasies aside, Trump voters face other contradictions between the policies they support and the results of those policies. Take, for example, NAFTA, "free trade" and U.S. consumption patterns. In the opening months of 2016, oil prices continued down, dropping below $30/barrel compared to $110 in 2014. Was there going to be a recession?  Or did lower oil prices mean we could return to driving big cars and pickup trucks?  More the latter than the former, with pickups providing the largest profit margins for the auto companies.

But such pickups are a major import from Mexico, where the average auto manufacturing wage is below $10/hour compared to as much as $30/hour in the U.S. A 20-30% Trump tariff on Mexican imports might produce some unhappy voters.

And by the end of 2016, OPEC and Russia had agreed on production cuts that may succeed in raising the price of gasoline. (Pickup trucks rarely get as much as 20 mpg.) A 20-30% tariff may shift some manufacturing jobs back to the United States, but higher pickup prices are not going to be popular. And, no, the buyers of pickup trucks are not only, or even primarily, the rural and small-town whites who supported Trump: among households with income over $250,000, the Ford F-150 is the most popular vehicle, at prices of $25-50,000.

The simmering resentment of these middle-income strata coalesced into the Tea Party in 2009-10 and, molded by and linked to threat of the “other” (whether undocumented immigrants, Muslim terrorists, or “nasty women”), produced a presidency based on economic delusions.

The lack of mooring to reality that fed the fake-news surge in the 2016 campaign obviously extends beyond the economy. But, will Trump, if faced with economic numbers that he doesn’t like, simply demand that they be changed? This notion may seem too much, even for Trump, but Jack Welch, former long-time General Electric CEO and now Trump confidante, laid the ground work for this dismissal of reality when he claimed in 2012 that job numbers under Obama were “cooked.” He simultaneously admitted that he had no evidence for this claim.

This disjuncture, between the world of empirical reality and the alternative narration that Trump and his minions are so adept at creating, poses a serious challenge to those of us on the Left. We are used to developing fact-based arguments – around the minimum wage, gender discrimination, voting – and we expect these arguments to be accepted or rebutted based on reality. If we are entering a world where everybody thinks they have a right to their own facts, we need to be creative in how we engage people and build the resistance.

Bill Barclay and Peg Strobel are members of Chicago DSA. They are National New Member Organizer and National Political Committee member, respectively.

Individually signed posts do not necessarily reflect the views of DSA as an organization or its leadership. Democratic Left blog post submission guidelines can be found here.