Flat wage growth continues to dog the Trump administration, confounding the president’s claims that his economic program is unleashing widespread prosperity. So the administration on Wednesday released a report challenging the federal government’s own statistics to make the case that wages are rising faster than the official scorekeeping reflects.
Rather than dropping 0.2 percent over the past year when adjusting for inflation, as Bureau of Labor Statistics show, Trump economists say average worker wages have climbed 1.4 percent.
The argument from the Council of Economic Advisers doesn’t exactly amount to a charge of “fake stats.” Economists, including two who worked for the Obama administration, say the CEA makes some convincing points in the 32-page report about the need to update the tools for measuring changes in worker pay.
But the effort also points to the urgency the Trump team feels to arm itself with rosier data that refute the Democratic critique that only corporate interests and the rich have benefited from its tax cuts and deregulation. They're doing so as Trump and his allies repeatedly tout the strength of his economic record just two months before the midterm elections.
The CEA report calls for several adjustments to how the federal government tracks wage growth. They include taking into account the effect of lower-paid workers replacing those aging out of the workforce; adopting the Federal Reserve’s preferred inflation measure; and including bonuses and benefits in calculating compensation.
“Wage gains are 10 to over 20 times more than the headline measures, although 10 to 20 times is kind of an exaggerated way to say it because you're starting with a really, really low number,” CEA Chairman Kevin Hassett said, per my colleague Jeff Stein.
Julia Pollak, a labor economist for the jobs website ZipRecruiter, tells me the adjustments that Hassett and his team advocate mostly make sense. But she notes the CEA only applied its proposed method to data back to 2015. “But if one applies all of their adjustments to wage data going back further, they don’t change the overall pattern,” she said. “This doesn’t answer the fundamental question, which is why is wage growth is slow now relative to earlier periods of low unemployment.”
Indeed, as Ernie Tedeschi, an economist in Obama’s Treasury Department, tells Jeff, “Even under their assumptions, real wage growth has weakened since late 2015, which is remarkable given how much further unemployment has fallen since then.’”
And Jason Furman, Obama’s top economic adviser, raised another issue:
In 2014, for example, the ACA subsidies and Medicaid expansion increased after-tax incomes broadly construed. But it would have been silly to add the subsidies to wages and describe it as wage growth.— Jason Furman (@jasonfurman) September 5, 2018
The White House has plenty of other good economic news to tout, and Hassett pointed to some of it Wednesday: The economy grew at an impressive, if potentially unsustainable, clip in the second quarter, and consumer sentiment and business confidence are up.
A Washington Post-ABC poll out this week found 58 percent of respondents view the economy as excellent or good, compared to 40 percent who say it is not so good or poor — tying most positive results for that question in 17 years. (Democrats, perhaps unsurprisingly, take a more skeptical view, with only 41 percent giving the economy positive marks.)
But that same survey nevertheless showed Republicans are at a deep disadvantage heading into the midterms. In spite of the economic tail winds, popular opposition to Trump is driving Democratic momentum, and that party has a 14-point edge on the generic ballot among registered voters.
Beyond antipathy to the president, the GOP has struggled to make the case that the tax cut — their signature domestic achievement — has yielded benefits for everyday workers. And as we wrote here last month, economists of all stripes say Hassett dramatically overstated the windfall it would yield for average families.
We’ll get fresh look at the state of Americans’ paychecks with the Friday jobs report. Private payrolls will likely show solid August growth in payroll processor ADP’s latest monthly report out today, according to Pantheon Macroeconomics. “Labor demand continues to rise, propelled by strong economic growth,” the firm wrote in a Wednesday note to clients. “Whether firms can find all the people they want to hire, though, is a different question.”
Trump, apparently in a tailspin over the anonymous New York Times op-ed about the resistance inside his administration to him, touted economic progress on Twitter this morning:
The Deep State and the Left, and their vehicle, the Fake News Media, are going Crazy - & they don’t know what to do. The Economy is booming like never before, Jobs are at Historic Highs, soon TWO Supreme Court Justices & maybe Declassification to find Additional Corruption. Wow!— Donald J. Trump (@realDonaldTrump) September 6, 2018
Cosumer confidence highest in 18 years, Atlanta Fed forecasts 4.7 GDP, manufacturing jobs highest in many years. “It’s the story of the Trump Administration, the Economic Success, that’s unnerving his detractors.” @MariaBartiromo— Donald J. Trump (@realDonaldTrump) September 6, 2018
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— Talks with Canada grind on. The Washington Post's David J. Lynch: “Negotiations over a new North American trade deal resumed Wednesday in Washington, clouded by uncertainty over Canadian reaction to [Trump’s] hardball negotiating style. Few analysts expect a quick resolution to the talks, which have blown through a series of self-imposed deadlines over the past year. ... At the White House, Trump told reporters the two sides were locked in ‘intense negotiations’ and he vowed to stop Canada from ‘taking advantage’ of the U.S. ‘We've come a long way toward them treating us fairly, but we're meeting right now with Canada and over the next day or two we'll see what happens,’ the president said.”
The stakes are high for Trudeau. The Post's Selena Ross: “With Canadian leader Justin Trudeau having a run of political bad luck at home, many are watching to see, as negotiations over the North American Free Trade Agreement resumed Wednesday, how his team navigates the fine line between catering to a domestic audience and striking a deal with the United States... In a sense, experts say, the easier task for Trudeau to is act on Canadian public opinion on Trump. The more difficult thing will be to predict voters’ reaction to different versions of a reworked trade agreement.”
Canada's trade surplus with the U.S. widens. Bloomberg News's Greg Quinn: “Canada’s merchandise trade surplus with the U.S., targeted by [Trump] in Nafta negotiations, grew to the widest in a decade. The surplus widened to [$4 billion] in July from [$3.1 billion] the previous month, when the U.S. hit Canada with tariffs on steel and aluminum. Statistics Canada said gains in global exports were led by automobiles and energy, almost all of which are bound for the U.S.”
— China says it's ready to strike back. Reuters: “China will be forced to retaliate if the United States implements any new tariff measures, China’s commerce ministry warned on Thursday, as the world’s two biggest economies remain locked in an intensifying trade war. ... ‘If the United States, regardless of opposition, adopts any new tariff measures, China will be forced to roll out necessary retaliatory measures,’ ministry spokesman Gao Feng told a regular news conference. China will closely monitor the impact from any fresh tariffs and adopt strong measures to help Chinese or foreign firms operating in China to overcome difficulties, said Gao.”
— U.S. trade deficit rises. The Associated Press's Paul Wiseman: “The U.S. trade deficit widened for the second straight month in July, reaching the highest level since February, as imports hit an all-time high. The deficit in goods with China and the European Union set records. The Commerce Department said Wednesday that the deficit in goods and services — the difference between what America sells and what it buys from other countries — rose to $50.1 billion in July from $45.7 billion in June. Exports slipped 1 percent to $211.1 billion. Imports increased 0.9 percent to a record $261.2 billion on increased purchases of trucks and computers.”
- “‘The sleeper cells have awoken’: Trump and aides shaken by ‘resistance’ op-ed.” The Post's Philip Rucker, Ashley Parker and Josh Dawsey.
— Worries mount over developing economies. Bloomberg News's Srinivasan Sivabalan: “For stocks, it’s 222 days. For currencies, 155 days. For local government bonds, 240 days. This year’s rout in emerging markets has lasted so long that it’s taken even the most ardent bears by surprise. Not one of the seven biggest selloffs since the financial crisis — including the so-called taper tantrum — inflicted such pain for so long on the developing world. The scope of the slide, as measured in the number of days from peak to trough, is pushing some strategists to say the slump is more than just a knee-jerk reaction to higher U.S. interest rates or the unfolding trade war. It’s become a full-fledged crisis of confidence for investors in developing nations.”
— Fed report: Repatriated profits mostly going to shareholders. Bloomberg's Christopher Condon: "U.S. companies encouraged by tax-code changes to bring home hundreds of billions of dollars in profits held abroad are so far returning that money to shareholders rather than plowing it into expansions, innovation or other forms of investment, new research from the Federal Reserve showed. 'Funds repatriated in 2018:Q1 have been associated with a dramatic increase in share buybacks,' Fed economists Michael Smolyansky, Gustavo Suarez and Alexandra Tabova, wrote in a paper posted this week on the central bank’s website. 'Evidence of an increase in investment is less clear at this stage, as it is likely too early to detect given that the effects may take time to materialize.'"
— FBI probes American Express. WSJ's AnnaMaria Andriotis: “The Federal Bureau of Investigation has launched a probe into pricing practices within American Express Co.’s foreign-exchange unit . . . The investigation, which is being run out of the FBI’s Washington field office, is in its early stages and is focused on whether the foreign-exchange international payments department misrepresented pricing to clients in order to win their business . . . The FBI is in the fact-gathering stage of the investigation . . . The bureau is communicating with AmEx and is waiting for the company to answer a list of questions.”
— Citigroup to announce staff changes. Bloomberg News's Dinesh Nair and Donal Griffin: “Citigroup Inc. is planning to promote bankers Tyler Dickson and Manolo Falco to run a reconstructed version of its investment banking operations, people familiar with the plan said. The lender will likely announce the plan on Thursday to combine its corporate and investment bank with its capital markets origination business, the people said, declining to be identified as the details are private. Ray McGuire, global head of corporate and investment banking, will take on a new role as a vice-chairman at Citigroup, the people said. Citigroup has been re-jigging its power structure over the past week.”
— Trump criticizes Kaepernick ad. The Washington Post's Amy B Wang and Rachel Siegel: “Nike revealed on Monday that [Colin] Kaepernick — the out-of-work NFL quarterback who generated controversy for kneeling during the national anthem to protest racial injustice and police brutality — would be featured in its 30th anniversary ‘Just Do It’ campaign . . . Trump weighed in on the Nike campaign Tuesday, telling the Daily Caller that he thought Nike was sending ‘a terrible message’ using Kaepernick in the ads. Still, he acknowledged the company's right to take a stance . . . On Wednesday, Trump tweeted stronger criticisms of both Nike and the NFL, repeating his claim that the league's ratings had gone ‘WAY DOWN’ and that Nike was ‘getting absolutely killed with anger and boycotts.’ Nike shares rose in Wednesday morning trading, after closing down more than 3 percent on Tuesday.”
— Trump renews shutdown threat. The Post's Erica Werner and Damian Paletta: "Trump on Wednesday threatened to order a government shutdown later this month as part of his immigration-related fight for more spending, appearing to contradict the strategy his budget director conveyed to congressional Republicans just hours earlier. It marked the latest herky-jerky spending confusion from the White House, which has left many lawmakers dizzy and confused as they enter last-minute discussions over how to proceed. 'If it happens, it happens,' Trump told reporters about the possibility of a shutdown during a meeting with congressional leaders. 'If it’s about border security, I’m willing to do anything.'”
Meanwhile, amid all the uncertainty, Sen. Richard Shelby has been making steady progress shepherding spending bills through the Senate with bipartisan support, Erica writes.
— Tax Cuts 2.0 vote is still on. Bloomberg: "House GOP leaders are forging ahead with a vote on a second phase of tax cuts this month, despite dissension from Republicans in high-tax states who say the measure would hurt their voters. The legislation would make permanent all the individual changes in the 2017 tax law, including the $10,000 cap on state and local tax deductions. The decision to hold the vote shows leaders have decided they can sacrifice the support of some Republican lawmakers in New York, New Jersey and other high-tax states -- and don’t mind putting them in the tricky spot of either supporting the cap, or voting against tax cuts backed by their party."
— Sanders targets Amazon. WSJ's Jay Greene: “An unusual public spat between Amazon.com Inc. and Sen. Bernie Sanders over workers’ wages escalated Wednesday as the Vermont independent introduced a bill aimed at taxing big companies whose employees rely on federal benefits to make ends meet. Mr. Sanders specifically targeted Amazon founder and leader Jeff Bezos, contrasting his vast personal wealth with the compensation of the companies’ lowest-paid workers. The senator, speaking at a press conference introducing the bill, noted Mr. Bezos 'could play a profound role' in altering the national discourse regarding pay by guaranteeing no Amazon worker receives less than a living wage, or enough to cover rent, food and other basic necessities.” (Amazon founder and chief executive Jeffrey P. Bezos is the owner of The Post.)
— SEC back to full strength. WSJ's Dave Michaels: "The Senate confirmed Elad Roisman to join the Securities and Exchange Commission, giving the regulator a fifth and final member as it prepares to impose restrictions on stockbroker advice while loosening the reins on some public companies. Mr. Roisman, 37 years old, will join the SEC after working for several years on the Senate Banking Committee, where he was the panel’s chief counsel. The Senate approved him 85-14."
But the Wall Street enforcement division lags. BNA: "The main SEC group responsible for policing Wall Street has hired only five new staffers despite losing more than three dozen since the waning days of the Obama administration, according to a Bloomberg Law review of agency records. The Enforcement Division departures — the most in any Securities and Exchange Commission group — come amid a hiring freeze and a drop in enforcement actions. The annual tally of enforcement actions the commission compiles each fall was down 13 percent in 2017, after a string of increases beginning in 2014."
- Senate Banking Committee hearing on Russia sanctions.
- House Financial Services Committee hearing titled “A failure to act: How a decade without GSE reform has once again put taxpayers at risk.”
- Joint Economic Committee hearing on the GOP tax overhaul.
- Senate Appropriations subcommittee hearing “to conduct oversight of the Bureau of Industry and Security, the International Trade Administration, and the United States International Trade Commission.”
Key moments from Day 2 of Brett Kavanaugh's confirmation hearing:
Congressman “auctions” protester out of hearing room:
Late-night laughs: The scathing NYT op-ed about Trump