Employment is not the only measure of economic success. Reagan famously said, “a rising tide lifts all boats,” meaning that general economic growth benefitted everyone (though maybe not equally). Full employment in an unproductive economy means a low standard of living for everyone. Consider that, under the old Soviet Union, very few unemployed West Germans were ever inspired to emigrate to East Germany in search of a job.
The size of the economy is measured by the gross domestic product and GDP growth usually means a healthy economy. When the GDP decreases for two quarters in a row, the economy is “in recession”. That always means a number of other bad things, including rising unemployment. GDP also can be thought of as the average prosperity of everyone in the economy. So, as with unemployment, a very good way to determine how the economy is doing is to watch the GDP. The next graph shows the change (growth) of the gross domestic product for each presidential term, starting with Herbert Hoover.
Source: US Department of Commerce (annually from 1929 through 1946 quarterly from 1947) http://www.bea.gov/national/index.htm#gdb (click on current dollar and real gdp)
Under Hoover, who saw the start of the Great Depression, the growth was spectacularly negative, reflecting the greatest economic catastrophe of that century. The value of the domestic economy (roughly, the average standard of living) had shrunk by fully one-fourth between Hoover’s inauguration in spring of 1929, and the end of his term in 1933.
Even more extraordinary is the rate the economy grew in Roosevelt’s first term—almost exactly erasing the losses during Hoover’s term. There is a common misconception that the economy didn’t begin to recover from the Great Depression until the onset of World War II. Perhaps this is because the economy started growing even faster in Roosevelt’s third term, but Roosevelt had robust economic growth in each of his terms.
The next graph focuses better on the post World War II terms.
As Truman came out of World War II in his first term, he had the only post-war presidential term of negative growth. This is not surprising, given the task of adapting to a peacetime economy from an economy that had grown in recent years almost entirely from war. Truman’s second term slightly more than compensated, however, resulting in net positive growth, which you can see in the graph. All other presidents had moderate GDP growth in each term.
Again, the comparisons are easier if we calculate the average (annualized)* growth rate per year. From the graph above, it is clear that each post-war president had single-digit annual economic growth, with the largest growth being in the Kennedy/Johnson administration and the smallest under GW Bush.
This chart compares average annual increase in GDP* for each president (highest growth to lowest growth). As stated before, Truman had an almost 10% drop in his first term, (the economy that had grown almost 75% in the previous term), but he made up for it with the greater than 27% increase in his second term. In fact, the average annual GDP during the entire Roosevelt/Truman era was much greater than for any of the other presidents. (6.1% average growth per year for 20 years straight)
GHW Bush 1.9%
GW Bush 1.7%
The Reagan administration delivers the fourth highest GDP growth numbers, and the Truman administration ranks almost at the bottom (second only to GW Bush, and one-tenth of percent behind GHW Bush). Again, with the exception of the Truman administration, each democratic administration produced more GDP growth per year than any Republican administration.
This is interesting news for people trying to figure out economic policy. The picture is not as black-and-white as for employment (where all Democratic administrations did better than any Republican administration). The evidence is quite strong that the things Democratic administrations do that seem to favor employment don’t hurt economic growth at all, and probably even give it a bit of a boost, compared to what Republicans do.