Watching the Economy by Clint Burdett CMC® FIMC

September 9, 2010

Business Cycles Are Independent of Politics and Party Majorities

By Clint Burdett CMC®

Business cycles are independent of politics and party majorities. Economic programs promised to a political base take months to impact business, often with unexpected results or credit taken years later, but in the end only business competitiveness and investment matters to create jobs.

Looking at the chart below, you see there is no correlation of a new President taking office and a spurt of economic good news. The election cycle and the business cycle do not parallel. If you don't see that then buy me lots of bourbon to talk me in to it ...

USA peak capacity is trending down. Job creation, the percent of the US population employed (the red line at the bottom of the chart) has peaked and is also trending down. The slope of the black lines represents the pace of job creation/month from the end of a recession to the beginning of the next. The green vertical lines mark inaugurations of new Presidents (Nixon, Ford, Carter, Reagan, Bush1, Clinton, Bush2, Obama).

The business cycle is independent of the election cycle, for example, Ford's quiet craftsmanship led to Carter's burst of job growth; Volker killed inflation and Reagan took off; Bush1 built the foundation for a recovery (and so doing, cost him the election) and then Clinton bragged; Bush2's tax cuts did not accelerate job creation over eight years. Presidents react. Individual business choices, structural changes in competitiveness, create or shed jobs.

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