There is a bit of a competition among incoming presidents to downplay the economy they inherit as it makes subsequent accomplishments seem all the more impressive.
In his inaugural address, Barack Obama noted with justification that “our economy is badly weakened.” Eight years later, Donald Trump claimed (with less evidence at hand) that he inherited “a mess” from Obama on the economy and other fronts.
Incoming President Joe Biden’s approach so far has been to compare the economy he’s now in charge of with the challenges that he and Obama grappled with when they took office in 2009 amid a financial crisis.
“The anxiety and fear of the women and men out there reminds me of when President Obama and I were sworn in during the Great Recession of 2009,” Biden said recently.
“Perhaps you have to go back to Franklin Roosevelt to think about someone who's come into office with as much crisis as Biden faces," said John Podesta, the former White House Chief of staff, in an interview with Yahoo Finance on Tuesday.
But which president really inherited the toughest situation? Yahoo Finance dug through a range of economic benchmarks – including the unemployment rate and consumer confidence data – to shed some light on the question.
Biden is certainly inheriting deep economic holes on many fronts as the coronavirus pandemic continues to undercut the economy. But at the same time, he’s also taking the reins of an economy with certain bright spots that other predecessors did not enjoy.
In short, Biden will oversee an economy with a unique mix of pressures that defy direct historical parallel in the last 60 years.
To adapt a line from Leo Tolstoy, perhaps every unhappy economy is unhappy in its own way. Here’s some of the unhappiest parts of the Biden economy and some of the bright spots that his economic team could be relying on in the years ahead.
Where Biden has it the toughest
Yahoo Finance analyzed 10 economic measures with data stretching back to at least 1968. The indicators included jobs gained or lost, GDP growth, the inflation rate, unemployment rate, consumer confidence, housing starts, S&P 500 performance, initial unemployment claims, the personal savings rate, and the labor force participation rate.
Biden’s deepest hole – compared with his nine immediate predecessors – is on the jobs front.
The early weeks of the COVID recession last year saw initial jobless claims – the number of new people receiving unemployment benefits each week – skyrocket to unprecedented levels and stay elevated into 2021.
Another gauge of labor market health is the employment level. This is simply the total number of people working in some form in the U.S. This measure declined by 5.61% over the last year, according to the Bureau of Labor Statistics. In December 2019, the employment level stood at just under 159 million people; 12 months later that figure is below 150 million.
Obama and Ronald Reagan are the only two other recent presidents who took office with fewer jobs on Inauguration Day than one year prior. In total over four years – largely because of the coronavirus pandemic – President Trump is leaving office with three million fewer jobs than when he arrived.
“The ongoing stress in the jobs market is clear for all to see,” James Knightley, ING chief international economist, said in a note last week. “We need to be braced for another decline in jobs in January.”
It’s also worth noting that most economic data doesn’t stretch all the way back to the Great Depression of the 1930s. But the rare measure that does shows the ominous situation that President Franklin Roosevelt faced in 1933.
Roosevelt took office on March 4, 1933. At that point, U.S. GDP had contracted a stunning 12.9% over the prior year. In 2020, the U.S. GDP decreased at an annualized rate of 32.9% in the second quarter of 2020, but it bounced back in the third quarter. So the total record for last year is more mixed.
Biden faces headwinds on other fronts as well, with current rates of GDP growth, consumer confidence, labor force participation all at lower levels now than what has been faced by most modern presidents.
Where Biden is inheriting some strength
Biden’s incoming team often notes the poor economic climate to bolster support for their agenda, including additional stimulus. “The truth is we're at a very precarious moment,” said Brian Deese, the incoming director of the National Economic Council in a Fox News interview over the weekend. “We've got an acute economic crisis and human crisis and we need decisive action.”
But there are some bright spots in the soon-to-be Biden economy.
For one, stocks are up about 14% over the last year. The S&P 500 index (^GSPC) wasn’t established until 1957, but an equivalent measure developed by a Yale professor indicates that the stock market declined over 24% in the year before FDR took office. Likewise, recent presidents like Gerald Ford, George W. Bush, and Obama didn’t have that support when they came into office. The S&P 500 opened 2008 at 1,467.97 and then closed the year at 903.25 as Obama was preparing to begin his term.
Another bright spot: There’s also likely to be substantial pent-up consumer demand coming which could help fuel Biden’s economy and agenda in 2021 and beyond if the vaccine rollout allow normal social interactions to resume.
The personal savings rate is at historically high levels as many Americans – sheltering from the coronavirus and able to put their stimulus checks into the bank – are saving more than ever before. Budget groups have noted that the stimulus checks had a real impact in 2020 as personal income grew massively even during the overall downturn.
In December Nick Colas, co-founder at DataTrek Research, wrote in a note to clients, “consumers absolutely delay purchases of just about everything they can in a recession, even when it is dangerous to do so (e.g. tires), and then ‘make up’ for this lost consumption in the next economic recovery.”
Ed Campbell, portfolio manager and managing director at investment firm QMA, took it a step further in a recent Yahoo Finance interview noting that "we think there's a lot of pent-up demand."
"You know, the economy is in pretty decent shape, and the question is, do we even need a $1.9 trillion stimulus bill at this point?" he said.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.