10 March 2022

2021 - How a Record Year of Real GDP Growth and Job Creation Compares to Other First Years for Presidents

I'm intrigued by data but often the more data one gets, the harder it is to make it tell a story. It is easier to draw a line between two points than it is to draw a line through 13.

Here is data on how the economy did in the first year of a presidency for our last 13 presidents. The punchline is that how the economy does in the first year doesn't make any difference in how a president does in the reelection effort 3 years later.

One weird little graph I created simply shows the sum of first year real GDP growth plus millions of jobs created. (3% real GDP growth plus 2 million jobs created = 5.) You can see that the presidents who did worst by this measure - Eisenhower, Reagan and Obama - handily won reelection. Of the four who did best by this measure, one was assassinated, one was reelected, one lost reelection and one (the one who has easily done best by this measure) is still in office and might conceivably not even run for reelection. In other words, the economy doing poorly in your first year definitely doesn't hurt you and the economy doing well is absolutely no guarantee of any particular political outcome 3 years later.
Anyway, we will likely never again see a year that combines such high rates of real GDP growth and job creation as did last year. The pandemic was a unique economic event and because of (largely) bipartisan support for stimulus the temporary shutdown did not ripple into years of crippling recovery but instead has already largely ended, the economy (for the most part) recovering in record time. It was a year ago today that Congress passed a huge stimulus package and that is a big part of why this recovery has been so strong and rapid.

I still think that the degree to which it changed in 2021's "have you tried turning it off and turning it back on again?" year+ of sharp economic contraction and rapid economic recovery is being glossed over. There is a common misconception that millions of people just lost their jobs and then - months or a year later went back to those same jobs. A lot changed in that time and there was a lot of creating along with the destruction.

Obviously a lot of spending shifted from services (travel and eating out, for instance) to goods and may now shift back again. Less obviously, the economy created a record number of new businesses (venture capital double what it was in any previous year) and the level of quits - and people finding or creating new jobs - also shattered old records. To the extent that this level of creative destruction sustains higher wages, productivity gains and more entrepreneurial creativity, the amazing numbers of 2021 could ripple into the future, leading us into a time in which last year could look like prelude to a golden period of economic progress. If not, last year could just look like the economy quickly rebounding to where it was.

Anyway, here are some numbers for my two blog readers who also find such things interesting.

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