The economic headlines this week look great for President Trump.
The reality is the U.S. economy is solid. It's not booming. And there's no “Trump bump” — yet.
“On balance, it’s hard to see a Trump bump,” said Doug Holtz-Eakin, head of the right-leaning American Action Forum and an economic adviser to many Republicans. “The economy is solid. It’s not spectacular.”
Every president talks up the economy. It's the president's job to be America's cheerleader-in-chief. To see how the Trump economy is really doing, look at growth, jobs, wages and business spending. All of those factors are showing no change since the days of President Barack Obama.
Yes, more Americans are getting jobs. Hiring in July was stronger than experts expected, with a net gain of 209,000 jobs. That's good news, but the pace of hiring is a tad worse than under Obama. The economy has added 1,074,000 jobs since Trump took office. During the same stretch last year, the economy gained 1,246,000 jobs under Obama.
“On the jobs metric, there's no Trump bump,” said Chris Rupkey, chief financial economist at MUFG bank in New York. “It's pretty consistent with the final year of Obama’s administration.”
The fastest-growing job category last month was low-paying retail jobs. Trump used to slam Obama by claiming he was creating only crummy jobs. Now that's part of the Trump story, too.
As for stocks: The market is going up. It has gained more than 20 percent since Trump won the election. But Wall Street is not Main Street, and about half of Americans have $0 in the market. Numerous studies have shown that better stock returns don't mean a turbocharged economy is on the way with more growth and higher wages for the middle class.
The stock market may be going up, but wages are not. On the campaign trail, Trump frequently decried how middle-class incomes were lower now than in 2000. He promised to change that, yet the jobs report that Trump called “excellent” showed that wages have increased only 2.5 percent in the past year. That's below the historic U.S. average and the same pace that Obama achieved.
Even some of the president's allies in Congress say it's too early to celebrate. Rep. Kevin Brady (R-Tex.), chairman of the House Ways and Means Committee, called the latest jobs report “solid.” “This report shows too many Americans are still having a hard time finding good-paying jobs, getting a raise, and providing for their families,” Brady said in a statement.
The White House has also been giving itself a pat on the back for increasing growth. Trump and his top advisers have promised growth of at least 3 percent a year, which would be a full percentage point higher than the average under Obama.
In the second quarter of this year, the period between April and June, gross domestic product was 2.6 percent. Trump celebrated it as “so much better than anticipated.” It sounds good, except for the fact that it's smack in line with second-quarter growth for the past four years. It's also only one quarter. Obama had plenty of quarters where growth was better than 3 percent. He just never had a year when growth was that high. Trump still has a long way to go to get there, too.
A big problem for Trump is his “MAGA-nomics” agenda has stalled in Congress. Just about every measure of consumer and business sentiment surged after Trump was elected. CEOs and business leaders cheered because they thought tax cuts were coming, along with more infrastructure spending and an easier regulatory environment. Now sentiment is starting to fade, as it looks less and less likely that Trump will achieve his full agenda. Even on taxes, CEOs are dialing back their expectation for how big the cuts will be and when they will come.
The one tangible area where Trump has been able to make real change is on regulations. He scaled back some, for example on the coal industry, and he's chosen not to enforce some other rules, especially when it comes to the environment.
“I think that the market pundits and many economists have wildly underestimated the degree to which the regulatory rollback is a positive for the economy,” said Tim Anderson, managing director of MND Partners, based on the floor of the New York Stock Exchange. Anderson said there may not be much evidence of a bump yet but there's reason to believe it will come as CEOs adjust to the new situation.
The key for Trump is to get businesses and consumers spending more. So far, it's not happening. People may say they are feeling better about the economy, but that hasn't translated into opening their wallets. The other missing factor is higher productivity growth, a fancy way of saying that workers need to produce more per hour than they do. That usually happens when technology improves because businesses did more spending to improve their factory floors and offices.
“You can’t declare victory on the economy until you see that productivity number shift,” Holtz-Eakin said. He called it the “Achilles’ heel” of this recovery. His recommendation to Congress? Get moving on a tax overhaul. “I think a serious pro-growth tax reform could be the single biggest impact on growth, maybe as big as 0.5 percent higher GDP.”
For Trump, the good news is the economy is doing all right. Few expect a recession anytime soon. But expectations of a bump are also fading.