The broad consensus among economists is that the U.S. economy is doing well, but these are not unprecedented times.
In a number of ways, the current economy is the best the nation has seen since the late 1990s. Unemployment is at a 50-year low, economic growth is steady, inflation is tame, and consumer confidence is high. This situation is helping many Americans get jobs and pay raises after years of struggles. Any president would be touting an economy like this, with record low unemployment rates for African Americans, Hispanics and people with less than a high school diploma.
“In many ways, I think the United States is doing well. We have a strong labor market,” Janet L. Yellen said Tuesday at a Bipartisan Policy Center event. Yellen is a former chair of the Federal Reserve and a former head of the White House Council of Economic Advisers under President Bill Clinton.
But where Trump goes too far is in touting this economy as the “best ever” and trying to portray the end of the Obama era as dire and himself as the hero flying in on the Trump jet to save the day. He has taken steps such as tax cuts to keep the economy growing and increase competitiveness, but he’s also inflicted pain. His tariffs have hurt U.S. manufacturing and agriculture. And his tax cuts and increased government spending have added substantially to the national debt.
Consider economic growth. Last year, the U.S. economy grew 2.3 percent — about average for this expansion and well below the 4 percent level Trump promised. So far in Trump’s term, growth is averaging 2.5 percent. That’s higher than under Presidents Barack Obama or George W. Bush, but much slower than the averages for Clinton and Ronald Reagan.
It’s a similar story looking at the stock market. The return so far for the Dow Jones industrial average during Trump’s tenure is very good (about 45 percent since he took office), but it’s below the returns of Clinton and Obama three years into their respective presidencies.
What’s different today, especially compared with the end of Obama’s second term, is that consumer confidence is significantly higher about the economy. In January 2017, 46 percent of Americans were satisfied with the state of the economy. In January 2020, that was up to 68 percent, according to a recent Gallup poll.
The uptick comes from the fact that nearly 6.7 million more Americans are employed today than when Trump took office. Monthly job gains were stronger under Obama than Trump, but the labor market has tightened further in recent years, helping more people feel better off. A combination of higher wage gains in recent months and Trump’s tax cuts have helped most Americans feel richer, even though many still worry about how to pay for health care, child care and college.
Overall, Trump’s economic track record is mixed. His “Trumponomics” playbook is big tax cuts, deregulation and tariffs. There’s widespread agreement that the tax cuts that took effect in 2018 boosted growth, sent the stock market to record highs and helped fuel the hot labor market, even triggering a hiring binge for blue-collar workers. But the effect was short-lived and came at a hefty cost to the national debt, which has spiked nearly 50 percent under Trump.
The scene at President Trump's third State of the Union address
Trump’s eagerness to impose tariffs last year spooked businesses. The tariffs caused companies to drastically scale back spending and pushed U.S. manufacturing into a mild recession in 2019. The tariffs have hit the hardest on parts used to make cars, washing machines and other products, raising costs for U.S. companies. A widely watched gauge of the health of the manufacturing sector — a survey of purchasing managers from the Institute for Supply Management — fell in December to its lowest level since the Great Recession.
The president argues that the tariffs were necessary to win concessions from China and other nations. He recently signed a partial “Phase One” trade deal with China and a revised deal with Mexico and Canada. In the short term, some U.S. businesses suffered clear pain from these tariffs. There’s hope that these deals will lead to more business opportunities for U.S. companies abroad, but that remains to be seen.
Perhaps the best case Trump can make for improvement, since he came into office, is higher wages. The unemployment rate has been falling steadily since 2011, but Obama and his top advisers regularly lamented that pay wasn’t going up much, even in 2015 and 2016. Business leaders believed there were still plenty of people seeking work, so they didn’t need to raise wages to attract and keep workers.
But that dynamic changed in 2018. Average hourly earnings, especially for rank-and-file workers, really started to pick up.
Many economists say businesses were forced to increase pay as the unemployment rate dropped below 4 percent, making it harder to find workers. Minimum wage increases in many states and cities played a role, too. Some economists also credit Trump’s large corporate tax cuts and deregulation push for helping keep the labor market hot.
Trump frequently notes that wage growth has been faster over much of the past year for lower-paid workers and non-managers than it has been for bosses, a welcome sign. He’s right that wage gains for nonsupervisory workers climbed as high as 3.6 percent in October, a level not seen since the crisis, according to the Labor Department, though the rate has since fallen.
As Trump takes a victory lap on the economy, his challenge is to keep the economy on a steady course as many of his tariffs continue to drag down global growth and as the coronavirus presents yet another serious worry for global business.
Trump “undoubtedly is concerned that the economy might be simply a modest plus in November, not the huge advantage that he’s counting on,” said Greg Valliere, chief strategist at AGF Investments.
Andrew van Dam contributed to this report.