Markets

The Markets Are Up, Unemployment Is Down. How Much Credit Should Trump Get?

Since taking office, President Trump has taken to Twitter to point to the rising stock market, strong jobs numbers and the health of the overall economy as signs of his success.

While his claims are largely true, most if not all of the positive indicators continue trends that began during the Obama administration — metrics Mr. Trump dismissed as “fiction” and “disastrous” before becoming president.

But as Sean Spicer, then his press secretary, said when the jobs numbers measuring the first full month of Mr. Trump’s tenure came out: “They may have been phony in the past, but it’s very real now.” Let’s take stock of the Trump economy.

Yes, the stock market has been soaring …






Dow Jones Industrial Average

Dow Jones Industrial Average

Dow Jones Industrial Average

Dow Jones

Industrial Average





Sources: Yahoo Finance; Google Finance | Daily closing prices are shown.

President Trump isn’t wrong about the stock market’s record heights. The Dow Jones industrial average passed the 22,000 mark for the first time on Wednesday, and other market indexes are at or near highs.

Hopes for action on tax policy, infrastructure spending and deregulation helped propel the market higher after Mr. Trump’s victory in November.

Although he and Congress haven’t been able to deliver on the first two, investors are enthusiastic about a lighter regulatory touch by the new administration. Stocks have also been buoyed by robust corporate earnings in the first half of the year.

… and unemployment has continued to decline.










Source: Bureau of Labor Statistics

At 4.3 percent in July, the unemployment rate is near its lowest level since early 2001, as Mr. Trump has claimed. What’s more, the rate is less than half its peak at 10 percent in October 2009 in the wake of the recession.

But nearly all of that drop occurred on the watch of his predecessor, Barack Obama. When Mr. Obama left office in January, unemployment was at 4.8 percent.

If Mr. Trump really wants something to boast about, he should aim to break the 4 percent threshold — that hasn’t been done since President Bill Clinton’s last full month in office in December 2000, when unemployment was at 3.9 percent.

But wages have been mostly flat …






12-month change in

average hourly earnings

12-month change in

average hourly earnings

12-month change in

average hourly earnings

12-month change in

average hourly earnings





Source: Bureau of Labor Statistics

Even as the unemployment rate has fallen, and other economic indicators, like home prices and the stock market, have been healthy, wages have barely budged. Yes, they’ve gone up, as Mr. Trump tweeted, but average hourly earnings were up 2.5 percent over the last 12 months as of June. That’s actually lower than the 2.9 percent pace in December 2016, just before he took office.

Just why the very low unemployment rate hasn’t led to an increase in pay is one of the biggest questions economists are wrestling with.

One possibility is that the number of workers who dropped out of the work force after the recession is bigger than first thought. The labor force participation rate fell sharply during and after the recession and stands at 62.9 percent, little changed from when Mr. Trump took office.






Labor force participation rate

Labor force participation rate

Labor force participation rate

Labor force participation rate





Source: Bureau of Labor Statistics

This so-called slack limits how much employers have to compete to attract workers, although most economists expect wage growth to improve if unemployment stays low.

… and G.D.P. growth is much the same as before the election.






Quarterly change in G.D.P.

Quarterly change in G.D.P.

Quarterly change in G.D.P.

Quarterly change in G.D.P.





Source: Federal Reserve Bank of St. Louis

Gross domestic product is a primary indicator of a country’s economic health. On July 28, the Commerce Department reported the economy had expanded at an annual rate of 2.6 percent in the second quarter, “an unbelievable number,” according to Mr. Trump.

But that came after a sluggish 1.2 percent rate in the first quarter; and as recently as the spring, many economists expected the rebound would be much stronger, with second-quarter growth topping 3.5 percent.

Nor is 2.6 percent an especially fast quarterly growth rate. In fact, the economy has grown 2.6 percent or more in 81 of the 145 quarters since Ronald Reagan became president, including 14 times during the Obama administration.

But perhaps Mr. Trump knows that. On Friday he tweeted an inflated figure, rounding up the most recent G.D.P. number to its nearest whole (not something most economists do).

tweet2.png

Leave a Reply

Your email address will not be published. Required fields are marked *

twenty + four =