CBO: America Will Never See Full Employment Under Obama – CNS
The Congressional Budget Office is now projecting that the U.S. economy will never achieve full employment during the eight years Barack Obama serves as president.
That would make Obama the only American president during the post-World War II era who never presided over a year in which the U.S. economy offered full employment to the American people.
The CBO defines “full employment” to be when the national unemployment rate is at or below what it calls the “natural unemployment rate.”
The natural unemployment rate, according to CBO, is the “rate of unemployment arising from all sources except fluctuations in aggregate demand. Those sources include frictional unemployment, which is associated with normal turnover of jobs, and structural unemployment, which includes unemployment caused by mismatches between the skills of available workers and the skills necessary to fill vacant positions and unemployment caused when wages exceed their market-clearing levels because of institutional factors, such as legal minimum wages, the presence of unions, social conventions, or wage-setting practices by employers that are intended to increase workers’ morale and effort.”
In a blog entry published last week, CBO Director Doug Elmendorf said “we think it will take four more years to get back close to full employment.”
In fact, baseline data CBO released last month indicate that the “natural unemployment rate” will be 5.5 percent through the rest of Obama’s presidency and that actual unemployment will never drop below 6.0 percent in any quarter between now and the end of 2016.
According to CBO, unemployment will remain above 7.0 percent through the third quarter of 2015. It will then drop to 6.8 percent in the fourth quarter of 2015, and gradually decline to 6.0 percent by the fourth quarter of 2016.
In the first quarter of 2017, when the next president is being sworn into office, the unemployment rate will drop to 5.8 percent, CBO projects. That would still be above the natural unemployment rate of 5.5 percent.
Finally, in the first quarter of 2018, according to CBO’s projections, unemployment will drop to 5.5 percent. At that point, a year after Obama has left office, the U.S. economy will finally achieve full employment for the first time since 2007.
Thus, according to CBO’s projections, America will never see full employment under Obama even though the CBO has increased what it considers to be the natural unemployment rate during Obama’s tenure. From the first quarter of 1999 through the first quarter of 2008, CBO calculated that the natural unemployment rate was 5.0 percent. Thus, for the economy to achieve full employment during that nine-year span, actual unemployment had to fall to 5.0 percent or lower.
Despite this higher standard, the economy did achieve full employment on a number of occasions from 1999 through 2008. This included, on average, the entire years of 2000, 2001, 2006 and 2007.
During the tenures of each American president from Harry Truman through George W. Bush – according to the average annual unemployment rates published by the Bureau of Labor Statistics and the natural unemployment rate calculated by CBO – there was at least one year in which the U.S. economy achieved full employment.
To see a complete list of the average actual annual unemployment rates compared to the natural unemployment rate for the years from 1988 onward click here.
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