New Directions

Settling down after 10 years. Going to post factual based commentary. For instance,

Obama wants credit for the Trump boom. Consider, 1) on average the stock market yields 10% a year; 2) the number of people working usually increases with each passing year; and 3) similarly wages usually increase year over year. Arguably every prior president could claim the successes of the following president as being due to him setting up his successor for success. The question is how much more or less accurate?

IMHO at his time, Obama is about 60% accurate. And here is why: when to start and end  data series is a contentious issue. Generally I think it best, given seasonality, to start and end on the same month and day and of some equal significance, meaning in case of presidential terms, election day,  inauguration day, around the first budget (the first year budget is passed, or not passed, thanks Congress, under the prior president.), those are the three fixed date options that I can think of.  The answer may differ according to the measure of economic performance. For instance, the stock market is forward looking, hence, election day is probably better than inauguration day or the first proposed or passed budget, whereas wages and employment numbers might be better delayed post election. Note I use BLS statistics, results vary a little depending on which variation one selects, but to no consequence on the conclusion.

The return on the Dow starting with Obama’s election day is 8.8% (including the 350 point bump on election day, fair to include because Obama was expected to win) compounded annually, for Trump, 3 years 16%, the ratio is 55%. Employment is up 100,000 a month on average for Obama, 188,000 a month for Trump 55%, Similarly wages 55% Obama versus Trump. Side issues – blue collar up more under Trump than Obama, but income inequality is a separate issue. Why not unemployment rates? Two reasons, unless things have changed, unemployment only counts those actively looking for work and those ending unemployment benefits aren’t counted either.

Running the numbers for the Dow starting with inauguration day, produces Obama 12% or 75% of Obama but the market fell after Obama’s election and surged following Trump’s. Suggesting the market viewed Trump’s election more favorably than Obama’s. I find it hard to believe that the president-elect has no effect on the market while the lame duck president continues to do so. Thus I favor starting to track on election day. Employment numbers January to January are 120542 versus 182192, a ratio of 66% and for average wages 62%.

Even the the difference between 75% and 100% on the Dow is substantial: over 3 years, 1.406 compounded versus 1.560, or 15.4, a full year’s growth. (1.12 for four years is 1.574). Extrapolating (will be interesting to see if the Trump boom can continue), 8 years of Trump would equal 10.6 years under Obama. The employment and wages ratios, 66% and 62% versus 75% are more consequential than the Dow differences once compounded.

What about the recession Obama inherited? That is tricky issue. The market tanked in Obama’s second year, after his budget and the trillion dollar stimulus fiasco. Could a better president have avoided that? I don’t know, Reagan didn’t. His recession was in the second year of his presidency as well.

In conclusion, the numbers vary somewhat depending on the day you choose to start, but Obama’s economy was 55% of Trump’s by multiple measures on my preferred choice, the day of election, and approximately 66% on January. Split the difference, 60%.

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