July 18, 2024
The Washington Post published a scorecard that evaluated the economy’s performance during the Trump and Biden administrations. While it has much useful information, there are a few areas where it needs some additional clarification.
The first and most important issue is the comparison of real wage growth under Trump and Biden. The problem is that the Post chart uses the average hourly real wage in January 2021, when Trump left office, as the basis for the comparisons.
This is problematic since the wage for that month is hugely distorted by the fact millions of low-paid workers were still unemployed as a result of the pandemic. For example, employment in the low-paying leisure and hospitality sector was 4.1 million lower in January of 2021 than it had been February of 2020 before the pandemic hit. This has the effect of raising the average wage in the same way that getting rid of the shortest person in the room increases the average height.
We are interested in the change in real wages that workers actually see, not increases due to changes in the composition of the workforce. There is no perfect way to adjust for this composition issue, but a crude correction would be to treat February 2020 as the end point for the Trump years and the start point for the Biden years. This treatment would also be consistent with some of the other graphs, where the pandemic period is pulled out and not attributed to either president.
With this adjustment, the growth in the average real wage for production and non-supervisory workers during the Trump years was 3.6 percent compared to 3.1 percent in the Biden years. That compares to the growth shown in the Post chart of 7.6 percent in the Trump years and 0.2 percent in the Biden years.
Homebuying
Another area that deserves some comment is its treatment of homebuying. The piece compares the monthly cost of buying the median house, relative to median income, under Trump and Biden. This cost was far lower under Trump than Biden primarily because mortgage rates were far lower but also because there was a sharp rise in house prices in the first year of the Biden administration.
While this comparison is accurate, it is primarily relevant for potential first-time homebuyers. That is a relatively small group compared to the 86 million households who already own a home.
These people were hugely benefitted by the low interest rates from the start of the pandemic until the Fed began raising rates in March of 2022. More than 14 million people refinanced their mortgages at lower interest rates. On average these households are saving more than $2,000 a year on interest payments.
It is also worth noting that, while the run-up in house prices is an unambiguous negative from the standpoint of first-time buyers, it can be a positive for existing homeowners. Higher house prices will help them if they move to a lower cost area, downsize, become renters or opt to get a reverse mortgage to help support their retirement.
Employment to Population Ratios
The piece includes a section showing overall employment-to-population ratios (EPOP), as well as the ratios for Blacks and women. This sort of comparison is distorted by the fact that the huge baby boom cohort is moving into its sixties and seventies, ages where they are far more likely to be retired.
A better comparison would look at the EPOPs for prime-age workers, ages 25 to 54. By this measure, the Biden administration looks considerably better than the Trump administration. For 2023, the year-round average for the overall prime-age EPOP was 80.7 percent, compared to just 80.0 percent in 2019, the best year under Trump.
For prime-age women, the year-round average EPOP was 75.1 percent in 2023 compared to 73.7 percent in 2019. For prime-age Blacks the year-round average was 77.6 percent in 2023, 1.6 percentage points higher than the 2019 peak of 76.0 percent under Trump.
There is much useful material in the Post’s charts, but these are areas where some additional context would have been helpful.
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