Over at the American Enterprise Institute blog, James Pethokoukis responds to my recent paper, Regulatory uncertainty: A phony explanation for our jobs problem, and blog post. I presented evidence that trends in investment, private-sector job growth, unemployment, and work hours were not inferior in this recovery compared to other recent job-challenged recoveries. That is, I noted that this recovery fares well relative to the recoveries under George W. Bush and George H. W. Bush. If you look at what employers are doing rather than what trade associations are saying, you would see that uncertainty about regulations and taxation has not impeded job growth. What we are seeing is what you expect given the slow growth in GDP.
What was especially curious to me is that Pethokoukis has no counter-argument or data other than, “But go ahead and contrast the Obama recovery, instead, to the Reagan recovery where private sector jobs grew 9.9 percent during its first two years.” Really, that’s it. The whole evidence that uncertainty is holding back jobs is that job growth in the Reagan recovery was a “V” recovery. Actually, the first two years of the recovery starting in Nov. 1982 was 9.4 percent, but what’s 0.5 percent job growth between friends? How does 7.2 percent private-sector job growth in the Gerald Ford-Jimmy Carter recovery fit into his story?
Pethokoukis is scrupulous enough to note that I do provide a good reason for the better job-performance in the Ronald Reagan recovery – that recession began with the short-term policy rates controlled by the Federal Reserve at 19 percent! There was plenty of room to use conventional monetary policy to get the economy moving. This time, the economy entered recession with these rates just over 4 percent. Oh, and the fact that this recession was caused by a financial crisis – something that research has shown again and again produces much slower recoveries.
Anyway, this just seems to confirm to me that there is no “there there” in the economic case that uncertainty about regulation and taxation is holding back job growth. I looked for any analysis that those articulating this view could point to and did not find any. I guess they do not have any over there at AEI.