A president’s economic policies in office can affect many aspects of the economy, including the unemployment rate. The unemployment rate, or the percentage of people in the job market who are not currently employed, can be used as a key indicator of the economy's overall health.
Looking at completed U.S. presidencies since Truman, President Johnson had the lowest average unemployment rate during his term, at 4.18%. Meanwhile, President Ford has the highest unemployment rate, at 7.76%, followed by Reagan at 7.51%.
Key Takeaways
- The unemployment rate is the percentage of the labor force that is not currently employed.
- It is a a key indicator of the overall health of the economy.
- The unemployment rate is a lagging indicator, meaning it changes as a result of economic conditions, rather than predicting them.
- A president and their administration’s economic policies such as tax cuts or increases and federal aid, can affect unemployment.
What Is Unemployment
The unemployment rate is a lagging indicator, meaning it changes as a result of economic conditions, rather than predicting them. Unemployment generally rises in a struggling economy where jobs are scarce, and falls when the economy is growing at a healthy rate with plenty of jobs available.
Overall, unemployment is a key economic indicator because it shows whether workers are able to get jobs and contribute to the economy. Higher levels of unemployment mean less total economic production. However, extremely low rates of unemployment can also signal an overheated economy. Unemployment data is calculated by the Bureau of Labor Statistics and is released by the BLS on the first Friday of every month.
The Federal Reserve, the nation’s central bank, sets U.S. monetary policy, with goals set forth by Congress to maintain a stable economy. One of the main goals of monetary policy is maximum employment and price stability, also known as its “dual mandate.” Maximum employment and price stability are known to create conditions for moderate long-term interest rates, indicating a stable economy.
Historical Overview of Unemployment Rates
While global and national events such as wars, recessions, and technological advancements in industries all play a role in unemployment, a president’s economic policies in office can affect unemployment rates as well.
President Biden has an average unemployment rate of 4.11%, the lowest on the list. However, since Biden’s presidency is not over yet, we won’t have the final numbers until after the end of his term. Unemployment hit its lowest level in 54 years in 2023, according to a release by the U.S. Department of Commerce from February 2023, when unemployment dropped to 3.4%.
Factors That Affect the Unemployment Rate
Many factors can affect unemployment, including government policies, technological advancements, and recessions.
The two main types of unemployment are called structural unemployment and cyclical unemployment. Cyclical unemployment happens due to economic downturns or recessions and is usually temporary, following the natural expansion and contraction of economic cycles. Unemployment generally decreases, and jobs should make a full recovery following a recession. While cyclical unemployment is generally temporary, the financial effects of it can last years depending on the severity of a recession, or if unemployment persists for a prolonged period.
Structural unemployment is more long-term and can last many years. It can be caused by multiple factors, such as workers needing additional training or qualifications to get jobs in the current market. This can happen when major technological advances across industries cater to workers with a specific skill set or qualifications and marginalize workers who don’t have those skills and, therefore, cannot be employed. These workers can then experience structural unemployment that lasts a long time.
Structural unemployment can lead to the elimination of many jobs, leading workers to experience socioeconomic disadvantages or poverty, reducing consumer spending and affecting the economy. Long-term solutions such as training programs for workers can help reverse the effects of structural unemployment.
After WWII, the government introduced the G.I. Bill, which paid stipends for college expenses for WWII veterans so that they could gain new skills that would allow them to find jobs and re-integrate into society.
Government policies can help reduce cyclical unemployment, such as during a recession. The Federal Reserve can use expansionary monetary policy to increase aggregate demand and economic growth by cutting interest rates. Lower interest rates can encourage people to spend and invest more. This increases aggregate demand and GDP and decreases unemployment. Policymakers may also introduce specific measures to increase employment and create jobs, such as giving businesses cash incentives for hiring workers and paying businesses to train employees for certain jobs.
Again, while structural unemployment is a long-term issue that requires more systematic changes, cyclical unemployment generally follows the business cycle, where unemployment goes up during recessions and decreases as the economy grows.
How Unemployment Affects the Economy
Unemployment is a key indicator of the overall strength of an economy and is closely monitored for that reason. Unemployment not only affects workers and their families, it has a ripple effect on the economy, too. When workers are unemployed, their households lose wages. Fewer people contributing to the economy reduces economic output and growth.
High levels of unemployment also reduces purchasing power, which leads to slower economic growth and could even lead to more unemployment for others.
High levels of unemployment also mean that people have less discretionary income to spend and less money is stimulating the economy. This can lead to slower or even shrinking economic growth, as 70% of the nation’s gross domestic product (GDP) comprises consumer spending.
Unemployment and inflation are also related. When unemployment levels are high, wages usually remain stagnant and don’t rise. When unemployment levels are low, employers generally need to pay higher wages to attract more employees, which can lead to wage inflation or rising wages.
According to a graph known as the Phillips Curve, low unemployment and rising wages lead to higher prices for goods and services in an economy, pushing the overall inflation rate higher. So according to the Phillips Curve, inflation and unemployment have a stable, inverse correlation. While there are arguments against the Phillips Curve, the Fed tries to balance inflation and unemployment to keep the economy stable. The central bank’s main goals for monetary policy are maximum employment, stable prices, and moderate long-term interest rates.
Unemployment Rate by President
A president’s contribution to the workforce is an important consideration for many voters, and draws a lot of attention both during elections and throughout a president’s time in office. While many external factors can affect unemployment and the economy overall, the president still plays a significant role in maintaining a strong workforce. Here is the average annual unemployment rate of U.S. presidents from Truman to Biden.
Unemployment rates and yearly average unemployment rates are calculated using data from 1948 -2024 from the U.S. Bureau of Labor Statistics via the Federal Reserve of Economic Data (FRED).
Harry S. Truman (1945 - 1953)
Average Unemployment Rate: 4.24%
The average annual unemployment rate under President Harry S. Truman was about 4.24%. Yearly unemployment data from the BLS begins in January 1948, about three years into Truman’s term. Truman was tasked with transitioning the economy after WWII, without creating a major recession.
In February 1946, Truman signed the Employment Act of 1946 into law to create and maintain “maximum employment” as thousands of WWII veterans returned home and the economy transitioned from war to peacetime. This legislation is why the federal government has the “dual mandate” of maintaining high employment and low inflation—even though economic theory says these goals contradict each other.
While unemployment rose to 7.9% in October 1949 because of a mild post-war recession that began in 1948, unemployment fell after that and remained under 3% through the rest of Truman’s term.
Dwight D. Eisenhower (1953 - 1961)
Average Unemployment Rate: 4.93%
The average annual unemployment rate under President Dwight D. Eisenhower was 4.93%. The economy went through three recessions during Eisenhower’s two terms in office, but the economy remained relatively strong through the 50s, with low unemployment (despite peaks during the recessions) and low inflation, better than any other post-WWII president.
During his presidency, personal income rose by 45%, which many American families used to buy new houses and new household items such as TVs. However, unemployment rose to 6.6% by the end of Eisenhower’s term in 1961 because of a recession that began in 1960. Eisenhower believed in maintaining a balanced budget, so he did not use fiscal policy to stimulate the economy out of the recession.
John F. Kennedy (1961 - 1963)
Average Unemployment Rate: 5.96%
The average annual unemployment rate under President John F. Kennedy was 5.96%. Unemployment was high from the previous administration, hovering at 6.9% when Kennedy took office. The economy was in the fourth major recession since WWII, and 5.5 million Americans were looking for jobs.
Kennedy helped end the 1960 recession by increasing domestic and military spending. He also increased the minimum wage and Social Security benefits. While the economy recovered and unemployment decreased somewhat, it still remained elevated, and was at 5.7% in November 1963 when he was assassinated.
Lyndon B. Johnson (1963 - 1969)
Average Unemployment Rate: 4.18%
The average annual unemployment rate under President Lyndon B. Johnson was 4.18%—the lowest on this list so far. Johnson’s Great Society programs, which included job training, a work-study program for college students, help for parents re-entering the workforce, and loans to employers to hire workers, helped boost jobs and businesses. Medicare and Medicaid were also introduced in Johnson’s Great Society, and still exist today.
Richard Nixon (1969 - 1974)
Average Unemployment Rate: 5.03%
The average annual unemployment rate under President Richard Nixon was 5.03%. Inflation had started to tick up in the late 60s, at the end of LBJ’s term, and Nixon wanted to cool inflation without sending the economy into a recession.
However, Nixon’s economic policies led to a decade of stagflation, a period of high unemployment levels and high inflation. Unemployment levels had climbed up to 5.5% and above by the time Nixon resigned at in August 1974.
Gerald R. Ford (1974 - 1977)
Average Unemployment Rate: 7.76%
The average annual unemployment rate under President Gerald Ford was 7.76%—the highest on the list. Ford inherited an economy battling stagflation and a recession that began in 1973. Unemployment hit a post-WWII high of 9% in May 1975 during the recession before decreasing slightly. Though economists generally believed that high prices meant strong businesses and low unemployment, stagflation in the 70s contradicted this theory with high inflation and unemployment.
Unemployment during this time was mainly because of a rise in foreign competition that slowed down the economy and job opportunities in the U.S. and more Americans in the workforce looking for jobs. Ford cut taxes and reduce regulation to stabilize the economy and while this ended the recession, inflation still remained elevated.
Jimmy Carter (1977 - 1981)
Average Unemployment Rate: 6.54%
The average annual unemployment rate under President Jimmy Carter was 6.54%. Stagflation continued into Carter’s presidency, but the unemployment rate slowly declined in the first half of Carter’s term. The economy was in a recession when Carter took office, and he had Congress pass an Economic Stimulus Appropriations Act to boost the economy and create jobs. While unemployment declined somewhat, inflation soared to double-digits due to an energy crisis in the Middle East that led to skyrocketing gas prices and shortages.
Carter has the highest average inflation rate among U.S. presidents so far. During Carter’s term, the misery index—which is the unemployment rate plus inflation—reached a record high of 21.98%.
Ronald Reagan (1981 - 1989)
Average Unemployment Rate: 7.51%
The average annual unemployment rate under President Ronald Reagan was 7.51%—the second highest on this list. When Reagan took office, the economy was in a recession that began in 1981 and worsened in 1982. Unemployment, which was already elevated since Carter’s term, continued to rise and soared to a post-WWII record of 10.8% by the end of 1982.
Reagan and his administration initiated policies that called for widespread tax cuts, decreased social spending, and deregulated markets in response to the recession. Reagan’s economic policies, known as Reaganomics, did reduce unemployment, which fell below 6% in the late ‘80s. However, critics of Reaganomics say his economic policies widened the wealth gap and added to national debt levels.
George H.W. Bush (1989 - 1993)
Average Unemployment Rate: 6.34%
The average annual unemployment rate under President George H.W. Bush was 6.34%. Unemployment rose steadily through Bush Sr.’s presidency. Bush Sr. faced the fallout from the Savings and Loan Crisis, which led to a recession from 1990-1991. Unemployment rose to nearly 8% in July 1992, the highest since 1984. The same month, Bush signed the Unemployment Compensation Amendments, which extended unemployment benefits for an additional 26 weeks after the first 26 weeks.
Bill Clinton (1993 - 2001)
Average Unemployment Rate: 5.17%
The average annual unemployment rate under President Bill Clinton was 5.17%. Unemployment levels declined steadily during Clinton’s presidency, and the economy did not experience any major recessions or wars during his two terms. About 23 million jobs were added to the economy under Clinton.
George W. Bush (2001 - 2009)
Average Unemployment Rate: 5.31%
The average annual unemployment rate under President George W. Bush was 5.31%. The 9/11 terrorist attacks, Hurricane Katrina, and the 2008 Great Recession all happened during Bush’s presidency. While unemployment was low at the start of Bush’s term, unemployment rose to nearly 8% at the end of his term, when the country was in the most severe recession since the Great Depression. Bush’s administration sent out tax rebate checks to provide some relief to American consumers and businesses during the recession. However, unemployment continued to rise.
Barack Obama (2009 - 2017)
Average Unemployment Rate: 7.41%
The average annual unemployment rate under President Barack Obama was 7.41%. Obama took office in the midst of the Great Recession, and unemployment continued to rise, hitting 10% in October 2009. Obama passed the $831 billion American Recovery and Reinvestment Act (ARRA) to end the recession, stimulate the economy, and help the job market recover. The unemployment rate went from 10% in 2009 to 4.6% in 2006 at the end of his two terms. Obama’s economic policies, known as Obamanomics, were controversial at the time, with its role in ending the 2008 financial crisis still debated today.
Donald Trump (2017 - 2021)
Average Unemployment Rate: 5.04%
The average annual unemployment rate under President Donald Trump was 5.04%. Unemployment remained low at the beginning of his term. However, when the economy went into a brief but severe recession at the start of the COVID-19 pandemic in 2020, unemployment skyrocketed to a record high of about 14.7% in April 2020—the highest monthly increase in the history of the BLS’s data. The Trump Administration declared a state of emergency and passed the $2 trillion CARES Act in an effort to provide relief to American families and businesses. While lockdowns continued and businesses struggled amid the COVID-19 pandemic, unemployment slowly came back down under 10% toward the end of Trump’s term.
Joe Biden (2021 - )
Average Unemployment Rate: 4.11%
The average annual unemployment rate under President Joe Biden is 4.11%. The economy recovered all the jobs lost during COVID-19 in just 29 months, the fastest recovery to pre-recession employment levels in over 40 years. Biden signed a $1.9 trillion economic stimulus package, the American Rescue Plan Act, to help people and businesses recover from COVID-19.
While unemployment dropped, inflation began to rise in 2022, leading the Fed to raise interest rates 11 times to combat soaring inflation Still, the labor market has remained strong, and unemployment dropped to levels not seen in 54 years in 2023.
What Is the U.S. unemployment rate as of 2024?
The U.S. unemployment rate as of March 2024 is 3.8%, according to data from the Federal Reserve of Economic Data (FRED).
Why Does Unemployment Rise in a Recession?
Since the economy slows down in a recession as consumers decrease their spending, there is less demand for goods and services that companies sell, so it slows down production. Companies making fewer products and offering fewer services means they need fewer employees, which often leads to layoffs. This feeds into the same cycles of unemployment— more layoffs mean there are less consumers spending money and therefore, less demand for goods and services. Cyclical unemployment typically follows the highs and lows of the business cycle, so it rises during recessions and falls in times of economic growth.
How Does Monetary Policy Affect Unemployment?
Expansionary monetary policy, which works to increase the money supply for the country, creates aggregate demand and economic growth by cutting interest rates. Lower interest rates make it easier for people to borrow money, which means they will spend more money and invest more. This increases overall demand and GDP and reduces unemployment.
Bottom Line
The unemployment rate is an important indicator of the overall strength of an economy, as healthy demand and output supports a strong labor force, whereas slower growth and less demand can lead to higher levels of unemployment. A president and their administration’s economic policies such as tax cuts or increases and federal aid, can affect job growth and businesses, which is why it is a factor that is looked at closely during elections and in the approval of a president’s time in office.
However, unemployment levels are not completely within a president’s control. They may inherit an struggling economy and conditions such as severe recessions, wars, pandemics, or other financial crises. However, the actions a president and their administration take in office do have a hand in helping or harming unemployment rates.
