No Michele. All recoveries are not equal

Governor Mitch Daniels (R-IN) and Representative Michele Bachmann (R-MN) yesterday made their claims on CNN’s State of the Union with Candi Crowley that the recovery is taking too long; that other post recession recoveries took the traditional V-shaped path. Maybe that’s the case, but those economies were nothing like the current economy in terms of their make-up.

Yes, when you compare the ten quarters of growth after the end of the 2007 recession with the ten quarters of growth after the 1982 recession, the Reagan Administration saw fantastic growth. The economy grew by 23.5% over that period. Private investment increased three percentage points during that period, accounting for 17.6% of GDP in the second quarter of 1985 versus 14.7% of GDP in first quarter 1983.

The Obama Administration has seen tepid growth over the ten quarters coming after the end of the 2007 recession. Private investment increased by less than two percentage points during the ten quarter period, accounting for 13.1% of GDP in the fourth quarter of 2011 versus 11.7% of GDP in the first quarter of 2009.

What Governor Daniels and Mrs. Bachmann fail to take into account in their praise of President Reagan was that the Great Communicator had a structurally different economy from that of Mr. Obama. A greater amount of output (88.5% of GDP) came from private industry under Reagan vs. Obama (87.4% of GDP).

The construction industry accounted for 5.4% of GDP under Reagan vs. 3.8% under Obama. Also manufacturing under Reagan accounted for 27.7% of GDP vs. 18.7% under Obama.

If you were a hands-on type of laborer, the 1980s were for you. If you are that type of laborer today, well, time travel hasn’t been invented yet. Structurally, this is not your father’s economy anymore.

Look at the changes in contribution to the economy from the information and finance industries. Under Reagan, the information industry contributed 3.8% of GDP vs. the 4.7% contribution to GDP under Obama. Digging deeper into the information and data processing sub-sector, we find that sub-sector under Reagan contributed .23% of GDP. Under the Obama Administration, the sub-sector contributed .54% of GDP.

The finance, insurance, and real estate sector contributed to 14.7% of GDP under Reagan. Under Obama it contributes 18.8% to GDP. The credit intermediary (banking) sub-sector Reagan contributed 2.6% to GDP, but under Obama chalked up a 4.0% contribution to national output.

Finally, there was barely a Wall Street during the Reagan years, with the securities and commodity contracts sub-sector providing just a .7% contribution to GDP. Under the Obama Administration, that contribution has tripled to 2.2% contribution to national output.

Could it be that our workers were not educated enough for the changes in the economy’s structure? Are we waiting for the manufacturing and construction jobs to come back?

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
This entry was posted in Barack Obama, Economy, Elections 2012, Obama, Political Economy, unemployment and tagged , , , , , , , , , . Bookmark the permalink.

One Response to No Michele. All recoveries are not equal

  1. Kenneth Ciszewski says:

    Alton–what you are describing are structural changes in the US economy. These changes have taken many by surprise. After all, if you are a carpenter or an electrician or a plumber, you are generally paid pretty well, and the kind of work you do is quite a bit different than that done by Software Engineers and Wall Street Brokers and analysts. The training is quite a bit different for each of these professions–the former are more by community college, technical school, and union apprenticeship, while the latter are more often by college degree. This is why we see many workers having to go back to school to find the education and training for different careers. Admittedly not everyone has the talents required to make the transition, but some do.

    Of course, even Information Technology professionals were hit hard during the Great Recession. MY home computer was repaired by a Dell technician who has lost his job in corporate IT in 2009.

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