Trump creates unemployment and economic growth
Three years into his presidency, Donald Trump is struggling to keep his economic promises, but he’s doing pretty well.
Throughout 2016, the president said he could slightly lower unemployment, stimulate economic growth and pave the way for lowering taxes and deleveraging.
Three years ago I promised to measure his progress in fulfilling those promises. Here’s a look at the numbers; I’ll leave politics to someone else.
Trump’s most significant achievements are reducing unemployment and increasing worker participation. All other US economic successes in the past year can be traced back to this important achievement.
The unemployment rate was 4.7 percent when Trump took office in 2017, and within a year it fell to 4.1 percent. For the 2020 campaign, the Bureau of Labor Statistics reports an unemployment rate of 3.5 percent.
Most economists believed 4 percent was full employment, but Trump has kept it at that level for almost two years.
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Trump mocked the unemployment rate as misleading when he ran for president, and he was right. A more important figure is the percentage of people between the ages of 25 and 54 who participate in the labor market.
This measure is what sets the Trump economy apart. According to the St. Louis Federal Reserve Bank, the labor force participation rate rose from 81.5 percent in January 2017 to 82.9 percent last month. The all-time high participation rate in 1999 was 84.6 percent.
Admittedly, these employment trends began in 2014 when the activity rate bottomed out at 80.5 percent. But Trump kept the jobs and they are driving economic growth.
There is an asterisk. Full employment should drive wages up, but so far they have barely exceeded the rate of inflation. Most new jobs are poorly paid and the highest wage earners received the most increases.
The labor market is also showing signs of extinction. Employers laid off 600,000 workers in 2019, the third highest number in the decade, the Ministry of Labor reports.
However, the consistent growth of the country’s gross domestic product – a broad measure of economic activity that captures the production of goods and services in the country – has proven more difficult.
Trump promised Americans to achieve GDP growth rates between 4 and 6 percent. Serious economists and experts like me laughed because that kind of growth is impossible in a mature economy with an aging population.
The United States had the highest real GDP growth rates during the Trump administration in the fourth quarter of 2017 and the second quarter of 2018. According to the Bureau of Economic Analysis, the seasonally adjusted annualized growth rate was 3.5 percent in both quarters.
A note: The BEA has revised previous estimates, which explains the discrepancy with last year’s column, in which I gave a rate of 4.2 percent.
Under Trump, the economy grew by an average of 2.6 percent per year. Although he didn’t promise it, it is still going strong by industrialized standards.
Much of that growth was due to Trump’s 2018 tax cuts, which largely benefited the richest Americans and pushed stock indices to all-time highs on higher profits.
However, the tax incentive is waning. Corporate borrowing and investment declined dramatically in 2019, largely due to its tariffs on China.
The American Bankers Association on Thursday forecast 1.9 percent growth in 2020. The group’s economists are optimistic that companies could increase their investments in 2020 as trade tensions ease.
Economic growth from tax incentives came at a cost. Federal debt has reached 105 percent of annual GDP, according to the St. Louis Fed. Trump added $ 4.7 trillion in debt to the bill, according to the Conservative Federal Responsible Budget Committee.
American voters don’t seem to care. Both parties like to spend money today and have their grandchildren pay it back through higher taxes after we’re dead.
If you happen to be a Trump supporter who believes tax cuts will pay off, let me introduce you to the Tooth Fairy. No tax cut has ever made up for a loss of revenue for a government.
However, consumer spending is strong thanks to high employment. It’s unclear whether that craze will overcome the $ 800 per family tax that tariffs will continue to levy, according to the New York Fed.
Should American voters base their votes on these statistics alone? Absolutely not. But these are the promises Trump made to the American people and, aside from his typical exaggeration, he has produced results.
A strong economy is a strong indicator of whether a sitting president will win re-election. Based on these results, Trump has a strong case for another four years in office.
Tomlinson writes commentaries on business, economics, and politics.