Democratic election sweep win would add 7 million more jobs than a GOP one, analysis finds
A democratic turn in this election cycle would, according to a new analysis, result in a faster recovery in the labor market than a republican one, which creates millions of more jobs, reduces the unemployment rate faster and increases the number of people in work.
In a scenario where Democratic presidential candidate Joe Biden wins the presidency and both the Senate and House of Representatives are controlled by Democrats, Moody's Analytics analysis would create 18.6 million jobs by 2024.
Under the opposite scenario, in which President Donald Trump wins a second term and Republicans control both houses of Congress, 11.2 million jobs would be created.
"Biden would implement much more aggressive fiscal support for the economy early in his tenure," Moody's Analytics chief economist Mark Zandi, who co-authored the report, told Yahoo Money. "That gives the economy a lot of juice early on in his term of office."
The unemployment rate would recover much faster even under Democratic control, dropping to 5.2% in 2022, compared to just 7.1% in a Republican scenario. The participation rate would also rise faster among the Democrats, reaching 63.6% in 2024, compared to 62.1% in the Republican scenario.
The unemployment rate would recover much faster under Democratic scrutiny, falling to 5.2% in 2022, compared to just 7.1% in a Republican scenario. (David Foster / Yahoo Finance)
Results change when opposing parties control Congress and the executive. With the Senate controlled by Republicans and the House controlled by Democrats, a presidential win by Biden would add 13.6 million jobs to the economy by 2024. If Trump wins, with the Senate under Republican control and the House under Democrats, the economy would create 11.8 million jobs.
In all iterations, a Biden win would mean more jobs.
Biden's economic policies suggest aggressive government spending, which would be financed by higher corporate taxes and budget deficits. However, according to Zandi's analysis, this is offset by the benefits of long-term economic growth.
"Biden is borrowing more, which isn't that much of a problem given that interest rates are zero and the Federal Reserve has announced that they will be staying there for the foreseeable future," he said. "That makes it a lot easier to run larger deficits to support the economy and bring the economy back to full employment."
"Trump has suggested very modest support"
Although the Democratic government would borrow more, the federal debt ratio wouldn't be much different if the Republicans were in control. The ratio - a key measure of a country's ability to pay off its debt - would be 129.7 under Biden and the Democrats by 2030 and 126.7 under Trump and the GOP.
President Donald J. Trump shakes hands with former Vice President Joe Biden as former President Barack Obama watches the inauguration of President Donald J. Trump on January 20, 2017. (Photo by Jonathan Newton / The Washington Post via Getty Images)
"The Democrats are spending more, the deficits are bigger, but the GDP is increasing," said Zandi. "The net impact of this is that in 10 years you will end up in the same place in terms of the nation's debt burden."
Infrastructure would be the biggest driver of the economy in the short term, and Biden's more aggressive spending in this area would encourage a faster recovery.
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Biden's proposal calls for $ 2.4 trillion in infrastructure spending over the next decade, while Trump is proposing a $ 1 trillion infrastructure plan over the same period that would be offset by spending cuts.
"Trump has proposed very modest support for the economy," said Zandi. "The only major spending initiative is on infrastructure, which is much smaller than Biden's proposal."
"The other policy that is rapidly increasing employment is immigration"
Immigration policy is also important for a rapid labor market recovery.
"The other policy that is raising employment quickly is immigration," said Zandi. "The more immigrants you have, both skilled and unskilled, the more manpower and productivity growth they will receive and the quicker they will support economic activity."
Biden's immigration policy would increase the number of employees and help rebound the labor market.
Another 870,000 Americans filed seasonally adjusted new jobless claims last week. (David Foster / Yahoo Finance)
If Trump continued to pursue highly restrictive immigration policies in his second term, it would slow down labor growth and productivity, the analysis said. Trump's policies would potentially reduce net immigration to 500,000 a year in his second term, or just half the average a quarter of a century before his term in office.
Trump's anti-trade policies are another reason why the recovery would be slower under Republican conditions, harming sectors like agriculture, manufacturing, and transportation, according to Zandi.
"[Trump] has a very commercial position," said Zandi. We expect he will deal with these customs wars again, especially with China, and that is very damaging to the job market. "
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Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova.
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